Mangalore Refinery and Petrochemicals' (NSE:MRPL) Returns On Capital Are Heading Higher

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Mangalore Refinery and Petrochemicals (NSE:MRPL) and its trend of ROCE, we really liked what we saw.

Our free stock report includes 2 warning signs investors should be aware of before investing in Mangalore Refinery and Petrochemicals. Read for free now.

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. Analysts use this formula to calculate it for Mangalore Refinery and Petrochemicals:

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

0.043 = ₹9.5b ÷ (₹344b - ₹122b) (Based on the trailing twelve months to March 2025).

Thus, Mangalore Refinery and Petrochemicals has an ROCE of 4.3%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 10%.

See our latest analysis for Mangalore Refinery and Petrochemicals

In the above chart we have measured Mangalore Refinery and Petrochemicals' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Mangalore Refinery and Petrochemicals .

So How Is Mangalore Refinery and Petrochemicals' ROCE Trending?

Mangalore Refinery and Petrochemicals has broken into the black (profitability) and we're sure it's a sight for sore eyes. While the business was unprofitable in the past, it's now turned things around and is earning 4.3% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

In summary, we're delighted to see that Mangalore Refinery and Petrochemicals has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Mangalore Refinery and Petrochemicals does have some risks, we noticed 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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.