Mindteck (India)'s (NSE:MINDTECK) Returns On Capital Are Heading Higher

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Mindteck (India) (NSE:MINDTECK) looks quite promising in regards to its trends of return on capital.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Mindteck (India) is:

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

0.095 = ₹182m ÷ (₹2.4b - ₹457m) (Based on the trailing twelve months to September 2022).

Therefore, Mindteck (India) has an ROCE of 9.5%. Ultimately, that's a low return and it under-performs the IT industry average of 12%.

See our latest analysis for Mindteck (India)

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

What Does the ROCE Trend For Mindteck (India) Tell Us?

Mindteck (India) has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 81% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Mindteck (India)'s ROCE

To sum it up, Mindteck (India) is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 84% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a separate note, we've found 3 warning signs for Mindteck (India) you'll probably want to know about.

While Mindteck (India) may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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.