The Trend Of High Returns At Happiest Minds Technologies (NSE:HAPPSTMNDS) Has Us Very Interested

There are a few key trends to look for if we want to identify the next 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Happiest Minds Technologies' (NSE:HAPPSTMNDS) look very promising so lets take a look.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Happiest Minds Technologies is:

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

0.28 = ₹2.0b ÷ (₹10b - ₹3.1b) (Based on the trailing twelve months to September 2021).

So, Happiest Minds Technologies has an ROCE of 28%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

See our latest analysis for Happiest Minds Technologies

Above you can see how the current ROCE for Happiest Minds Technologies 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 Happiest Minds Technologies here for free.

What Does the ROCE Trend For Happiest Minds Technologies Tell Us?

We're delighted to see that Happiest Minds Technologies is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 28% on its capital. And unsurprisingly, like most companies trying to break into the black, Happiest Minds Technologies is utilizing 302% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Happiest Minds Technologies' ROCE

In summary, it's great to see that Happiest Minds Technologies has managed to break into profitability and is continuing to reinvest in its business. And with the stock having performed exceptionally well over the last year, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Happiest Minds Technologies can keep these trends up, it could have a bright future ahead.

If you want to continue researching Happiest Minds Technologies, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.