Returns On Capital Are Showing Encouraging Signs At C. E. Info Systems (NSE:MAPMYINDIA)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 C. E. Info Systems (NSE:MAPMYINDIA) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for C. E. Info Systems:

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

0.19 = ₹1.4b ÷ (₹8.4b - ₹1.0b) (Based on the trailing twelve months to December 2024).

Thus, C. E. Info Systems has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 12% generated by the Software industry.

Check out our latest analysis for C. E. Info Systems

Above you can see how the current ROCE for C. E. Info Systems compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for C. E. Info Systems .

The Trend Of ROCE

Investors would be pleased with what's happening at C. E. Info Systems. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 136%. 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.

What We Can Learn From C. E. Info Systems' ROCE

To sum it up, C. E. Info Systems has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Investors may not be impressed by the favorable underlying trends yet because over the last three years the stock has only returned 10% to shareholders. So with that in mind, we think the stock deserves further research.

While C. E. Info Systems looks impressive, no company is worth an infinite price. The intrinsic value infographic for MAPMYINDIA helps visualize whether it is currently trading for a fair price.

While C. E. Info Systems 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.