Dr. Lal PathLabs (NSE:LALPATHLAB) Could Become A Multi-Bagger

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Dr. Lal PathLabs' (NSE:LALPATHLAB) returns on capital, so let's have a look.

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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. The formula for this calculation on Dr. Lal PathLabs is:

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

0.24 = ₹6.0b ÷ (₹30b - ₹4.3b) (Based on the trailing twelve months to September 2025).

Therefore, Dr. Lal PathLabs has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Healthcare industry average of 11%.

See our latest analysis for Dr. Lal PathLabs

Above you can see how the current ROCE for Dr. Lal PathLabs compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Dr. Lal PathLabs .

So How Is Dr. Lal PathLabs' ROCE Trending?

We like the trends that we're seeing from Dr. Lal PathLabs. Over the last five years, returns on capital employed have risen substantially to 24%. 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 98%. So we're very much inspired by what we're seeing at Dr. Lal PathLabs thanks to its ability to profitably reinvest capital.

The Key Takeaway

All in all, it's terrific to see that Dr. Lal PathLabs is reaping the rewards from prior investments and is growing its capital base. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 39% to shareholders. So with that in mind, we think the stock deserves further research.

On a final note, we've found 1 warning sign for Dr. Lal PathLabs that we think you should be aware of.

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.