Matrimony.com (NSE:MATRIMONY) Is Reinvesting At Lower Rates Of Return

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Matrimony.com (NSE:MATRIMONY), we don't think it's current trends fit the mold of a multi-bagger.

Understanding 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. The formula for this calculation on Matrimony.com is:

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

0.13 = ₹437m ÷ (₹5.0b - ₹1.7b) (Based on the trailing twelve months to March 2024).

Thus, Matrimony.com has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Interactive Media and Services industry average of 12%.

View our latest analysis for Matrimony.com

In the above chart we have measured Matrimony.com's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Matrimony.com .

So How Is Matrimony.com's ROCE Trending?

In terms of Matrimony.com's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 13% from 20% five years ago. However it looks like Matrimony.com might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line On Matrimony.com's ROCE

To conclude, we've found that Matrimony.com is reinvesting in the business, but returns have been falling. And investors may be recognizing these trends since the stock has only returned a total of 3.9% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you'd like to know about the risks facing Matrimony.com, we've discovered 1 warning sign that 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.