Returns At Manaksia Coated Metals & Industries (NSE:MANAKCOAT) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Manaksia Coated Metals & Industries (NSE:MANAKCOAT) so let's look a bit deeper.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Manaksia Coated Metals & Industries:

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

0.099 = ₹213m ÷ (₹4.0b - ₹1.8b) (Based on the trailing twelve months to December 2020).

So, Manaksia Coated Metals & Industries has an ROCE of 9.9%. Even though it's in line with the industry average of 10%, it's still a low return by itself.

Check out our latest analysis for Manaksia Coated Metals & Industries

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Manaksia Coated Metals & Industries, check out these free graphs here.

What Can We Tell From Manaksia Coated Metals & Industries' ROCE Trend?

Manaksia Coated Metals & Industries has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 9.9% on its capital. Not only that, but the company is utilizing 99% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a separate but related note, it's important to know that Manaksia Coated Metals & Industries has a current liabilities to total assets ratio of 46%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line On Manaksia Coated Metals & Industries' ROCE

In summary, it's great to see that Manaksia Coated Metals & Industries has managed to break into profitability and is continuing to reinvest in its business. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing: We've identified 3 warning signs with Manaksia Coated Metals & Industries (at least 1 which is significant) , and understanding them would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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