There's Been No Shortage Of Growth Recently For Aster DM Healthcare's (NSE:ASTERDM) Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Aster DM Healthcare (NSE:ASTERDM) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

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)

0.088 = ₹9.1b ÷ (₹157b - ₹54b) (Based on the trailing twelve months to September 2023).

Thus, Aster DM Healthcare has an ROCE of 8.8%. In absolute terms, that's a low return and it also under-performs the Healthcare industry average of 13%.

View our latest analysis for Aster DM Healthcare

Above you can see how the current ROCE for Aster DM Healthcare compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Aster DM Healthcare.

What Can We Tell From Aster DM Healthcare's ROCE Trend?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 8.8%. The amount of capital employed has increased too, by 79%. So we're very much inspired by what we're seeing at Aster DM Healthcare thanks to its ability to profitably reinvest capital.

The Bottom Line On Aster DM Healthcare's ROCE

All in all, it's terrific to see that Aster DM Healthcare is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 172% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

One more thing, we've spotted 1 warning sign facing Aster DM Healthcare that you might find interesting.

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.