Here's What To Make Of Ratnamani Metals & Tubes' (NSE:RATNAMANI) Decelerating Rates Of Return

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So, when we ran our eye over Ratnamani Metals & Tubes' (NSE:RATNAMANI) trend of ROCE, we liked 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 Ratnamani Metals & Tubes, this is the formula:

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

0.18 = ₹7.2b ÷ (₹49b - ₹10.0b) (Based on the trailing twelve months to March 2025).

Thus, Ratnamani Metals & Tubes has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 13% generated by the Metals and Mining industry.

See our latest analysis for Ratnamani Metals & Tubes

In the above chart we have measured Ratnamani Metals & Tubes' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Ratnamani Metals & Tubes for free.

What Does the ROCE Trend For Ratnamani Metals & Tubes Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 103% more capital in the last five years, and the returns on that capital have remained stable at 18%. Since 18% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

Our Take On Ratnamani Metals & Tubes' ROCE

The main thing to remember is that Ratnamani Metals & Tubes has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 311% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

On a final note, we've found 1 warning sign for Ratnamani Metals & Tubes that we think you should be aware of.

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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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.