Returns On Capital At MITCON Consultancy & Engineering Services (NSE:MITCON) Have Stalled

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. However, after investigating MITCON Consultancy & Engineering Services (NSE:MITCON), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What is it?

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. The formula for this calculation on MITCON Consultancy & Engineering Services is:

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

0.048 = ₹81m ÷ (₹1.9b - ₹250m) (Based on the trailing twelve months to March 2020).

So, MITCON Consultancy & Engineering Services has an ROCE of 4.8%. Ultimately, that's a low return and it under-performs the Professional Services industry average of 8.4%.

View our latest analysis for MITCON Consultancy & Engineering Services

Historical performance is a great place to start when researching a stock so above you can see the gauge for MITCON Consultancy & Engineering Services' ROCE against it's prior returns. If you'd like to look at how MITCON Consultancy & Engineering Services has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

In terms of MITCON Consultancy & Engineering Services' historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 4.8% for the last five years, and the capital employed within the business has risen 89% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

In Conclusion...

In conclusion, MITCON Consultancy & Engineering Services has been investing more capital into the business, but returns on that capital haven't increased. And investors appear hesitant that the trends will pick up because the stock has fallen 33% in the last three years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know more about MITCON Consultancy & Engineering Services, we've spotted 5 warning signs, and 2 of them can't be ignored.

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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