All E Technologies' (NSE:ALLETEC) Returns On Capital Are Heading Higher

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at All E Technologies (NSE:ALLETEC) so let's look a bit deeper.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for All E Technologies, this is the formula:

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

0.15 = ₹159m ÷ (₹1.4b - ₹324m) (Based on the trailing twelve months to December 2023).

So, All E Technologies has an ROCE of 15%. In isolation, that's a pretty standard return but against the IT industry average of 20%, it's not as good.

See our latest analysis for All E Technologies

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

The Trend Of ROCE

The trends we've noticed at All E Technologies are quite reassuring. The data shows that returns on capital have increased substantially over the last four years to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 251% more capital is being employed now too. So we're very much inspired by what we're seeing at All E Technologies thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, All E Technologies has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 183% to shareholders over the last year, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing to note, we've identified 3 warning signs with All E Technologies and understanding them should be part of your investment process.

While All E Technologies 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.