Why The 21% Return On Capital At Wendt (India) (NSE:WENDT) Should Have Your Attention

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, the ROCE of Wendt (India) (NSE:WENDT) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Wendt (India) is:

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

0.21 = ₹316m ÷ (₹1.9b - ₹355m) (Based on the trailing twelve months to December 2021).

Therefore, Wendt (India) has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

See our latest analysis for Wendt (India)

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

The Trend Of ROCE

Investors would be pleased with what's happening at Wendt (India). The data shows that returns on capital have increased substantially over the last five years to 21%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 27%. So we're very much inspired by what we're seeing at Wendt (India) thanks to its ability to profitably reinvest capital.

The Bottom Line On Wendt (India)'s ROCE

To sum it up, Wendt (India) has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 216% to shareholders over the last five years, it looks like investors are recognizing these changes. 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 Wendt (India), we've discovered 2 warning signs that you should be aware of.

Wendt (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.