Under The Bonnet, Lloyds Metals and Energy's (NSE:LLOYDSME) Returns Look Impressive

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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 Lloyds Metals and Energy's (NSE:LLOYDSME) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

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. Analysts use this formula to calculate it for Lloyds Metals and Energy:

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

0.26 = ₹19b ÷ (₹94b - ₹21b) (Based on the trailing twelve months to March 2025).

So, Lloyds Metals and Energy has an ROCE of 26%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

See our latest analysis for Lloyds Metals and Energy

In the above chart we have measured Lloyds Metals and Energy'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 Lloyds Metals and Energy .

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Lloyds Metals and Energy are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 26%. The amount of capital employed has increased too, by 1,334%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Lloyds Metals and Energy's ROCE

To sum it up, Lloyds Metals and Energy has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 113% total return over the last year tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 1 warning sign facing Lloyds Metals and Energy that you might find interesting.

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.