Mangalam Worldwide (NSE:MWL) Might Have The Makings Of A Multi-Bagger

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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Mangalam Worldwide's (NSE:MWL) returns on capital, so let's have a look.

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 Mangalam Worldwide:

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

0.082 = ₹132m ÷ (₹2.6b - ₹972m) (Based on the trailing twelve months to March 2023).

Thus, Mangalam Worldwide has an ROCE of 8.2%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 14%.

View our latest analysis for Mangalam Worldwide

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 Mangalam Worldwide, check out these free graphs here.

The Trend Of ROCE

The fact that Mangalam Worldwide is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 8.2% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Mangalam Worldwide is utilizing 13,545% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

On a related note, the company's ratio of current liabilities to total assets has decreased to 38%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Mangalam Worldwide has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

Our Take On Mangalam Worldwide's ROCE

Overall, Mangalam Worldwide gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with a respectable 17% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know more about Mangalam Worldwide, we've spotted 4 warning signs, and 2 of them are a bit concerning.

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.