We Like These Underlying Return On Capital Trends At MIC Electronics (NSE:MICEL)

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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at MIC Electronics (NSE:MICEL) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for MIC Electronics, this is the formula:

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

0.07 = ₹164m ÷ (₹3.1b - ₹783m) (Based on the trailing twelve months to March 2025).

Thus, MIC Electronics has an ROCE of 7.0%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 24%.

View our latest analysis for MIC Electronics

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

So How Is MIC Electronics' ROCE Trending?

The fact that MIC Electronics is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making four years ago but is is now generating 7.0% on its capital. In addition to that, MIC Electronics is employing 658% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

One more thing to note, MIC Electronics has decreased current liabilities to 25% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

What We Can Learn From MIC Electronics' ROCE

To the delight of most shareholders, MIC Electronics has now broken into profitability. Since the stock has returned a staggering 10,082% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if MIC Electronics can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing MIC Electronics we've found 3 warning signs (1 is a bit unpleasant!) that you should be aware of before investing 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.