Krystal Integrated Services (NSE:KRYSTAL) Is Experiencing Growth In Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Krystal Integrated Services' (NSE:KRYSTAL) returns on capital, so let's have 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. To calculate this metric for Krystal Integrated Services, this is the formula:

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

0.15 = ₹691m ÷ (₹7.6b - ₹3.1b) (Based on the trailing twelve months to March 2025).

So, Krystal Integrated Services has an ROCE of 15%. That's a relatively normal return on capital, and it's around the 17% generated by the Commercial Services industry.

View our latest analysis for Krystal Integrated Services

Historical performance is a great place to start when researching a stock so above you can see the gauge for Krystal Integrated Services' ROCE against it's prior returns. If you're interested in investigating Krystal Integrated Services' past further, check out this free graph covering Krystal Integrated Services' past earnings, revenue and cash flow.

How Are Returns Trending?

We like the trends that we're seeing from Krystal Integrated Services. Over the last four years, returns on capital employed have risen substantially to 15%. The amount of capital employed has increased too, by 172%. So we're very much inspired by what we're seeing at Krystal Integrated Services thanks to its ability to profitably reinvest capital.

On a related note, the company's ratio of current liabilities to total assets has decreased to 41%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance. Nevertheless, there are some potential risks the company is bearing with current liabilities that high, so just keep that in mind.

The Bottom Line On Krystal Integrated Services' ROCE

To sum it up, Krystal Integrated Services has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has fallen 14% over the last year, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One final note, you should learn about the 2 warning signs we've spotted with Krystal Integrated Services (including 1 which makes us a bit uncomfortable) .

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.