Inventurus Knowledge Solutions (NSE:IKS) Could Be Struggling To Allocate Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 while Inventurus Knowledge Solutions (NSE:IKS) has a high ROCE right now, lets see what we can decipher from how returns are changing.

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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. To calculate this metric for Inventurus Knowledge Solutions, this is the formula:

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

0.28 = ₹8.1b ÷ (₹36b - ₹6.9b) (Based on the trailing twelve months to September 2025).

Therefore, Inventurus Knowledge Solutions has an ROCE of 28%. In absolute terms that's a great return and it's even better than the Healthcare Services industry average of 8.7%.

View our latest analysis for Inventurus Knowledge Solutions

Above you can see how the current ROCE for Inventurus Knowledge Solutions compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Inventurus Knowledge Solutions for free.

How Are Returns Trending?

On the surface, the trend of ROCE at Inventurus Knowledge Solutions doesn't inspire confidence. While it's comforting that the ROCE is high, four years ago it was 36%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line

While returns have fallen for Inventurus Knowledge Solutions in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And there could be an opportunity here if other metrics look good too, because the stock has declined 16% in the last year. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

Inventurus Knowledge Solutions could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for IKS on our platform quite valuable.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.