The Return Trends At Global Health (NSE:MEDANTA) Look Promising

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. So on that note, Global Health (NSE:MEDANTA) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Global Health is:

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

0.17 = ₹6.2b ÷ (₹43b - ₹6.2b) (Based on the trailing twelve months to June 2024).

So, Global Health has an ROCE of 17%. That's a relatively normal return on capital, and it's around the 15% generated by the Healthcare industry.

View our latest analysis for Global Health

In the above chart we have measured Global Health's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Global Health .

How Are Returns Trending?

We like the trends that we're seeing from Global Health. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 86% more capital is being employed now too. So we're very much inspired by what we're seeing at Global Health thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Global Health is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 61% return over the last year. In light of that, we think it's worth looking further into this stock because if Global Health can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for MEDANTA on our platform that is definitely worth checking out.

While Global Health isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.