Investors Will Want Maharashtra Seamless' (NSE:MAHSEAMLES) Growth In ROCE To Persist

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Maharashtra Seamless (NSE:MAHSEAMLES) so let's look a bit deeper.

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. The formula for this calculation on Maharashtra Seamless is:

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

0.17 = ₹7.6b ÷ (₹56b - ₹11b) (Based on the trailing twelve months to December 2022).

Therefore, Maharashtra Seamless has an ROCE of 17%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Metals and Mining industry average of 15%.

See our latest analysis for Maharashtra Seamless

In the above chart we have measured Maharashtra Seamless' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Maharashtra Seamless.

So How Is Maharashtra Seamless' ROCE Trending?

Maharashtra Seamless is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 17%. The amount of capital employed has increased too, by 32%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Maharashtra Seamless' ROCE

To sum it up, Maharashtra Seamless has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 67% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 1 warning sign for Maharashtra Seamless you'll probably want to know about.

While Maharashtra Seamless 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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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.