Technocraft Industries (India) (NSE:TIIL) Is Very Good At Capital Allocation

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Technocraft Industries (India)'s (NSE:TIIL) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

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 Technocraft Industries (India):

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

0.24 = ₹3.6b ÷ (₹24b - ₹8.6b) (Based on the trailing twelve months to June 2023).

So, Technocraft Industries (India) has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

See our latest analysis for Technocraft Industries (India)

Historical performance is a great place to start when researching a stock so above you can see the gauge for Technocraft Industries (India)'s ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Technocraft Industries (India), check out these free graphs here.

What Does the ROCE Trend For Technocraft Industries (India) Tell Us?

We like the trends that we're seeing from Technocraft Industries (India). The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 92% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

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 Technocraft Industries (India) has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know about the risks facing Technocraft Industries (India), we've discovered 1 warning sign that you should be aware of.

Technocraft Industries (India) is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.