Stock Analysis

We're Watching These Trends At Mohini Health & Hygiene (NSE:MHHL)

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Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Mohini Health & Hygiene (NSE:MHHL) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. To calculate this metric for Mohini Health & Hygiene, this is the formula:

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

0.091 = ₹81m ÷ (₹1.3b - ₹451m) (Based on the trailing twelve months to March 2020).

Thus, Mohini Health & Hygiene has an ROCE of 9.1%. In absolute terms, that's a low return but it's around the Medical Equipment industry average of 9.9%.

Check out our latest analysis for Mohini Health & Hygiene

NSEI:MHHL Return on Capital Employed December 18th 2020

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mohini Health & Hygiene's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Mohini Health & Hygiene, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

The returns on capital haven't changed much for Mohini Health & Hygiene in recent years. The company has consistently earned 9.1% for the last five years, and the capital employed within the business has risen 92% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line

In summary, Mohini Health & Hygiene has simply been reinvesting capital and generating the same low rate of return as before. Unsurprisingly then, the total return to shareholders over the last year has been flat. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you want to continue researching Mohini Health & Hygiene, you might be interested to know about the 3 warning signs that our analysis has discovered.

While Mohini Health & Hygiene may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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Find out whether Mohini Health & Hygiene is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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This article by Simply Wall St is general in nature. 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.
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