We Like These Underlying Return On Capital Trends At Krishna Institute of Medical Sciences (NSE:KIMS)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Speaking of which, we noticed some great changes in Krishna Institute of Medical Sciences' (NSE:KIMS) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for Krishna Institute of Medical Sciences:

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

0.14 = ₹5.4b ÷ (₹46b - ₹6.6b) (Based on the trailing twelve months to September 2024).

So, Krishna Institute of Medical Sciences has an ROCE of 14%. That's a pretty standard return and it's in line with the industry average of 14%.

View our latest analysis for Krishna Institute of Medical Sciences

Above you can see how the current ROCE for Krishna Institute of Medical Sciences 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 Krishna Institute of Medical Sciences for free.

What The Trend Of ROCE Can Tell Us

Krishna Institute of Medical Sciences is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 14%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 314%. So we're very much inspired by what we're seeing at Krishna Institute of Medical Sciences thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that Krishna Institute of Medical Sciences is reaping the rewards from prior investments and is growing its capital base. And a remarkable 123% total return over the last three years tells us that investors are expecting more good things to come in the future. 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.

If you'd like to know about the risks facing Krishna Institute of Medical Sciences, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.