The Return Trends At PNC Infratech (NSE:PNCINFRA) Look Promising

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at PNC Infratech (NSE:PNCINFRA) and its trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on PNC Infratech is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.13 = ₹12b ÷ (₹103b - ₹15b) (Based on the trailing twelve months to September 2021).

Thus, PNC Infratech has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 9.7% it's much better.

Check out our latest analysis for PNC Infratech

Above you can see how the current ROCE for PNC Infratech compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is PNC Infratech's ROCE Trending?

PNC Infratech is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 98%. So we're very much inspired by what we're seeing at PNC Infratech thanks to its ability to profitably reinvest capital.

Our Take On PNC Infratech's ROCE

In summary, it's great to see that PNC Infratech can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing PNC Infratech, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.