There's Been No Shortage Of Growth Recently For IntraSoft Technologies' (NSE:ISFT) Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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 on that note, IntraSoft Technologies (NSE:ISFT) looks quite promising in regards to its trends of return on capital.

We've discovered 1 warning sign about IntraSoft Technologies. View them for free.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for IntraSoft Technologies:

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

0.071 = ₹177m ÷ (₹2.8b - ₹271m) (Based on the trailing twelve months to December 2024).

So, IntraSoft Technologies has an ROCE of 7.1%. Even though it's in line with the industry average of 7.0%, it's still a low return by itself.

See our latest analysis for IntraSoft Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for IntraSoft Technologies' ROCE against it's prior returns. If you'd like to look at how IntraSoft Technologies has performed in the past in other metrics, you can view this free graph of IntraSoft Technologies' past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

IntraSoft Technologies has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 409% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

To sum it up, IntraSoft Technologies is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 60% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

IntraSoft Technologies does have some risks though, and we've spotted 1 warning sign for IntraSoft Technologies that you might be interested in.

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.