Returns At Maharashtra Seamless (NSE:MAHSEAMLES) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Maharashtra Seamless (NSE:MAHSEAMLES) looks quite promising in regards to its trends of return on capital.

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 Maharashtra Seamless, this is the formula:

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

0.15 = ₹6.8b ÷ (₹56b - ₹11b) (Based on the trailing twelve months to September 2022).

Therefore, Maharashtra Seamless has an ROCE of 15%. That's a pretty standard return and it's in line with the industry average of 15%.

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In the above chart we have measured Maharashtra Seamless' 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 report on analyst forecasts for the company.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Maharashtra Seamless. The data shows that returns on capital have increased substantially over the last five years to 15%. 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 32%. So we're very much inspired by what we're seeing at Maharashtra Seamless thanks to its ability to profitably reinvest capital.

The Key Takeaway

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 Maharashtra Seamless has. And with a respectable 66% 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. In light of that, we think it's worth looking further into this stock because if Maharashtra Seamless can keep these trends up, it could have a bright future ahead.

While Maharashtra Seamless looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MAHSEAMLES is currently trading for a fair price.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.