We Like These Underlying Return On Capital Trends At On Door Concepts (NSE:ONDOOR)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in On Door Concepts' (NSE:ONDOOR) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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 On Door Concepts, this is the formula:

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

0.08 = ₹79m ÷ (₹1.3b - ₹302m) (Based on the trailing twelve months to March 2025).

Therefore, On Door Concepts has an ROCE of 8.0%. On its own that's a low return, but compared to the average of 4.8% generated by the Consumer Retailing industry, it's much better.

View our latest analysis for On Door Concepts

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how On Door Concepts has performed in the past in other metrics, you can view this free graph of On Door Concepts' past earnings, revenue and cash flow.

How Are Returns Trending?

On Door Concepts has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 8.0% on its capital. And unsurprisingly, like most companies trying to break into the black, On Door Concepts is utilizing 130% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On On Door Concepts' ROCE

Long story short, we're delighted to see that On Door Concepts' reinvestment activities have paid off and the company is now profitable. And since the stock has dived 71% over the last year, there may be other factors affecting the company's prospects. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

One more thing, we've spotted 1 warning sign facing On Door Concepts that you might find interesting.

While On Door Concepts may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.