Return Trends At Ratnamani Metals & Tubes (NSE:RATNAMANI) Aren't Appealing

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at Ratnamani Metals & Tubes' (NSE:RATNAMANI) ROCE trend, we were pretty happy with what we saw.

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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. The formula for this calculation on Ratnamani Metals & Tubes is:

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

0.19 = ₹6.6b ÷ (₹43b - ₹8.0b) (Based on the trailing twelve months to December 2024).

So, Ratnamani Metals & Tubes has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 14% generated by the Metals and Mining industry.

View our latest analysis for Ratnamani Metals & Tubes

Above you can see how the current ROCE for Ratnamani Metals & Tubes compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Ratnamani Metals & Tubes .

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has employed 95% more capital in the last five years, and the returns on that capital have remained stable at 19%. Since 19% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Key Takeaway

The main thing to remember is that Ratnamani Metals & Tubes has proven its ability to continually reinvest at respectable rates of return. And long term investors would be thrilled with the 331% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a separate note, we've found 1 warning sign for Ratnamani Metals & Tubes you'll probably want to know about.

While Ratnamani Metals & Tubes may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.