Returns At Maharashtra Seamless (NSE:MAHSEAMLES) Appear To Be Weighed Down

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Maharashtra Seamless' (NSE:MAHSEAMLES) ROCE trend, we were pretty happy with what we saw.

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

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 Maharashtra Seamless, this is the formula:

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

0.13 = ₹8.1b ÷ (₹68b - ₹4.5b) (Based on the trailing twelve months to December 2024).

Thus, Maharashtra Seamless has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 14% generated by the Metals and Mining industry.

Check out 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 analyst report for Maharashtra Seamless .

What Can We Tell From Maharashtra Seamless' ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 13% and the business has deployed 54% more capital into its operations. 13% is a pretty standard return, and it provides some comfort knowing that Maharashtra Seamless has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On Maharashtra Seamless' ROCE

The main thing to remember is that Maharashtra Seamless has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 592% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

On a final note, we've found 1 warning sign for Maharashtra Seamless that we think you should be aware of.

While Maharashtra Seamless isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.