Latent View Analytics (NSE:LATENTVIEW) Will Be Hoping To Turn Its Returns On Capital Around

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Latent View Analytics (NSE:LATENTVIEW) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

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 Latent View Analytics:

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

0.097 = ₹1.4b ÷ (₹15b - ₹530m) (Based on the trailing twelve months to June 2024).

So, Latent View Analytics has an ROCE of 9.7%. In absolute terms, that's a low return but it's around the Professional Services industry average of 12%.

See our latest analysis for Latent View Analytics

Above you can see how the current ROCE for Latent View Analytics 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 Latent View Analytics for free.

What Does the ROCE Trend For Latent View Analytics Tell Us?

In terms of Latent View Analytics' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 9.7% from 23% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

What We Can Learn From Latent View Analytics' ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Latent View Analytics is reinvesting for growth and has higher sales as a result. Furthermore the stock has climbed 17% over the last year, it would appear that investors are upbeat about the future. So should these growth trends continue, we'd be optimistic on the stock going forward.

Latent View Analytics could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for LATENTVIEW on our platform quite valuable.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.