Returns Are Gaining Momentum At Aster DM Healthcare (NSE:ASTERDM)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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 Aster DM Healthcare's (NSE:ASTERDM) returns on capital, so let's have a look.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Aster DM Healthcare:

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

0.097 = ₹5.6b ÷ (₹66b - ₹8.8b) (Based on the trailing twelve months to June 2025).

Thus, Aster DM Healthcare has an ROCE of 9.7%. On its own, that's a low figure but it's around the 12% average generated by the Healthcare industry.

Check out our latest analysis for Aster DM Healthcare

In the above chart we have measured Aster DM Healthcare's 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 Aster DM Healthcare .

The Trend Of ROCE

We're pretty happy with how the ROCE has been trending at Aster DM Healthcare. We found that the returns on capital employed over the last five years have risen by 49%. The company is now earning ₹0.1 per dollar of capital employed. In regards to capital employed, Aster DM Healthcare appears to been achieving more with less, since the business is using 34% less capital to run its operation. Aster DM Healthcare may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

One more thing to note, Aster DM Healthcare has decreased current liabilities to 13% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Key Takeaway

In summary, it's great to see that Aster DM Healthcare has been able to turn things around and earn higher returns on lower amounts of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 1 warning sign for Aster DM Healthcare that we think you should be aware of.

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.