Thyrocare Technologies (NSE:THYROCARE) Knows How To Allocate Capital Effectively

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. With that in mind, the ROCE of Thyrocare Technologies (NSE:THYROCARE) looks great, so lets see what the trend can tell us.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Thyrocare Technologies, this is the formula:

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

0.27 = ₹1.2b ÷ (₹5.2b - ₹755m) (Based on the trailing twelve months to December 2020).

So, Thyrocare Technologies has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Healthcare industry average of 10%.

View our latest analysis for Thyrocare Technologies

Above you can see how the current ROCE for Thyrocare Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Thyrocare Technologies.

What Does the ROCE Trend For Thyrocare Technologies Tell Us?

We like the trends that we're seeing from Thyrocare Technologies. Over the last five years, returns on capital employed have risen substantially to 27%. 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 28%. So we're very much inspired by what we're seeing at Thyrocare Technologies thanks to its ability to profitably reinvest capital.

Our Take On Thyrocare Technologies' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Thyrocare Technologies has. And with a respectable 52% awarded to those who held the stock over the last three years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Thyrocare Technologies, you might be interested to know about the 2 warning signs that our analysis has discovered.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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