Returns At Welspun Enterprises (NSE:WELENT) Appear To Be Weighed Down

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Welspun Enterprises (NSE:WELENT) looks decent, right now, so lets see what the trend of returns can tell us.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Welspun Enterprises:

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

0.11 = ₹4.4b ÷ (₹54b - ₹16b) (Based on the trailing twelve months to December 2024).

So, Welspun Enterprises has an ROCE of 11%. In absolute terms, that's a pretty standard return but compared to the Construction industry average it falls behind.

Check out our latest analysis for Welspun Enterprises

Above you can see how the current ROCE for Welspun Enterprises 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 Welspun Enterprises for free.

So How Is Welspun Enterprises' ROCE Trending?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 11% and the business has deployed 93% more capital into its operations. 11% is a pretty standard return, and it provides some comfort knowing that Welspun Enterprises has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Welspun Enterprises' ROCE

The main thing to remember is that Welspun Enterprises has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 934% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to continue researching Welspun Enterprises, you might be interested to know about the 2 warning signs that our analysis has discovered.

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.