Investors Shouldn't Overlook Transformers and Rectifiers (India)'s (NSE:TARIL) Impressive Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at Transformers and Rectifiers (India)'s (NSE:TARIL) look very promising so lets take a look.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Transformers and Rectifiers (India):

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

0.25 = ₹3.5b ÷ (₹22b - ₹8.0b) (Based on the trailing twelve months to June 2025).

So, Transformers and Rectifiers (India) has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

See our latest analysis for Transformers and Rectifiers (India)

Above you can see how the current ROCE for Transformers and Rectifiers (India) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Transformers and Rectifiers (India) for free.

So How Is Transformers and Rectifiers (India)'s ROCE Trending?

We like the trends that we're seeing from Transformers and Rectifiers (India). The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 25%. The amount of capital employed has increased too, by 250%. So we're very much inspired by what we're seeing at Transformers and Rectifiers (India) thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 37%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

What We Can Learn From Transformers and Rectifiers (India)'s 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 Transformers and Rectifiers (India) has. And a remarkable 10,491% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Transformers and Rectifiers (India) can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for TARIL on our platform that is definitely worth checking out.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.