Matrimony.com (NSE:MATRIMONY) Will Be Hoping To Turn Its Returns On Capital Around

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. However, after investigating Matrimony.com (NSE:MATRIMONY), we don't think it's current trends fit the mold of a multi-bagger.

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 Matrimony.com is:

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

0.15 = ₹564m ÷ (₹5.2b - ₹1.5b) (Based on the trailing twelve months to June 2022).

Therefore, Matrimony.com has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Interactive Media and Services industry average of 14%.

Check out our latest analysis for Matrimony.com

Above you can see how the current ROCE for Matrimony.com compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Matrimony.com here for free.

What Can We Tell From Matrimony.com's ROCE Trend?

On the surface, the trend of ROCE at Matrimony.com doesn't inspire confidence. To be more specific, ROCE has fallen from 41% over the last four years. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On Matrimony.com's ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Matrimony.com is reinvesting for growth and has higher sales as a result. And the stock has followed suit returning a meaningful 32% to shareholders over the last three years. So should these growth trends continue, we'd be optimistic on the stock going forward.

On a separate note, we've found 1 warning sign for Matrimony.com you'll probably want to know about.

While Matrimony.com 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.