Why We Like The Returns At Intense Technologies (NSE:INTENTECH)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at the ROCE trend of Intense Technologies (NSE:INTENTECH) we really liked what we saw.

Understanding 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 Intense Technologies is:

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

0.22 = ₹232m ÷ (₹1.1b - ₹51m) (Based on the trailing twelve months to December 2022).

So, Intense Technologies has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Software industry average of 13%.

Check out our latest analysis for Intense Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for Intense Technologies' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Intense Technologies, check out these free graphs here.

SWOT Analysis for Intense Technologies

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Intense Technologies are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 22%. The amount of capital employed has increased too, by 145%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, Intense Technologies has decreased current liabilities to 4.6% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Key Takeaway

To sum it up, Intense Technologies has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we've found 3 warning signs for Intense Technologies that we think you should be aware of.

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.

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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.