One Point One Solutions (NSE:ONEPOINT) Has More To Do To Multiply In Value Going Forward

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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 investigating One Point One Solutions (NSE:ONEPOINT), we don't think it's current trends fit the mold of a multi-bagger.

We've discovered 1 warning sign about One Point One Solutions. View them for free.

Return On Capital Employed (ROCE): What Is It?

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 One Point One Solutions is:

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

0.097 = ₹425m ÷ (₹5.0b - ₹600m) (Based on the trailing twelve months to December 2024).

Thus, One Point One Solutions has an ROCE of 9.7%. On its own, that's a low figure but it's around the 12% average generated by the Professional Services industry.

Check out our latest analysis for One Point One Solutions

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

What Can We Tell From One Point One Solutions' ROCE Trend?

The returns on capital haven't changed much for One Point One Solutions in recent years. The company has consistently earned 9.7% for the last five years, and the capital employed within the business has risen 176% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From One Point One Solutions' ROCE

Long story short, while One Point One Solutions has been reinvesting its capital, the returns that it's generating haven't increased. Yet to long term shareholders the stock has gifted them an incredible 3,226% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

One more thing to note, we've identified 1 warning sign with One Point One Solutions and understanding it should be part of your investment process.

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.