Radhika Jeweltech's (NSE:RADHIKAJWE) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. 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 looked at Radhika Jeweltech (NSE:RADHIKAJWE) and its trend of ROCE, we really liked what we saw.

Understanding 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. The formula for this calculation on Radhika Jeweltech is:

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

0.17 = ₹391m ÷ (₹2.6b - ₹329m) (Based on the trailing twelve months to March 2023).

Thus, Radhika Jeweltech has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 12% generated by the Specialty Retail industry.

See our latest analysis for Radhika Jeweltech

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

So How Is Radhika Jeweltech's ROCE Trending?

Radhika Jeweltech is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 27% more capital is being employed now too. So we're very much inspired by what we're seeing at Radhika Jeweltech thanks to its ability to profitably reinvest capital.

Our Take On Radhika Jeweltech's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Radhika Jeweltech has. Since the stock has returned a solid 18% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you'd like to know more about Radhika Jeweltech, we've spotted 4 warning signs, and 1 of them shouldn't be ignored.

While Radhika Jeweltech isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.