Returns On Capital Are A Standout For One Point One Solutions (NSE:ONEPOINT)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. So when we looked at the ROCE trend of One Point One Solutions (NSE:ONEPOINT) we really liked what we saw.

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. To calculate this metric for One Point One Solutions, this is the formula:

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

0.24 = ₹241m ÷ (₹1.5b - ₹493m) (Based on the trailing twelve months to December 2023).

So, One Point One Solutions has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Professional Services industry average of 13%.

View 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of One Point One Solutions.

How Are Returns Trending?

One Point One Solutions is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 24%. The amount of capital employed has increased too, by 34%. So we're very much inspired by what we're seeing at One Point One Solutions thanks to its ability to profitably reinvest capital.

What We Can Learn From One Point One Solutions' ROCE

In summary, it's great to see that One Point One Solutions can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 989% 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.

On a separate note, we've found 2 warning signs for One Point One Solutions you'll probably want to know about.

One Point One Solutions 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.