Returns At Spectrum Electrical Industries (NSE:SPECTRUM) Are On The Way Up

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 Spectrum Electrical Industries (NSE:SPECTRUM) and its trend of ROCE, we really liked what we saw.

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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. Analysts use this formula to calculate it for Spectrum Electrical Industries:

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

0.19 = ₹541m ÷ (₹4.6b - ₹1.7b) (Based on the trailing twelve months to September 2025).

So, Spectrum Electrical Industries has an ROCE of 19%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Electrical industry average of 17%.

See our latest analysis for Spectrum Electrical Industries

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Spectrum Electrical Industries' past further, check out this free graph covering Spectrum Electrical Industries' past earnings, revenue and cash flow.

So How Is Spectrum Electrical Industries' ROCE Trending?

Investors would be pleased with what's happening at Spectrum Electrical Industries. The data shows that returns on capital have increased substantially over the last five years to 19%. The amount of capital employed has increased too, by 150%. So we're very much inspired by what we're seeing at Spectrum Electrical Industries thanks to its ability to profitably reinvest capital.

What We Can Learn From Spectrum Electrical Industries' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Spectrum Electrical Industries has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Spectrum Electrical Industries does have some risks, we noticed 3 warning signs (and 2 which make us uncomfortable) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.