Investors Will Want Indian Metals and Ferro Alloys' (NSE:IMFA) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Indian Metals and Ferro Alloys (NSE:IMFA) and its trend of ROCE, we really liked what we saw.

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Understanding 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 Indian Metals and Ferro Alloys, this is the formula:

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

0.15 = ₹4.1b ÷ (₹34b - ₹7.7b) (Based on the trailing twelve months to September 2025).

Thus, Indian Metals and Ferro Alloys has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Metals and Mining industry average of 12% it's much better.

See our latest analysis for Indian Metals and Ferro Alloys

Above you can see how the current ROCE for Indian Metals and Ferro Alloys 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 analyst report for Indian Metals and Ferro Alloys .

How Are Returns Trending?

We like the trends that we're seeing from Indian Metals and Ferro Alloys. The data shows that returns on capital have increased substantially over the last five years to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 51% more capital is being employed now too. So we're very much inspired by what we're seeing at Indian Metals and Ferro Alloys thanks to its ability to profitably reinvest capital.

Our Take On Indian Metals and Ferro Alloys' ROCE

To sum it up, Indian Metals and Ferro Alloys has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 958% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

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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.