The Return Trends At Mindteck (India) (NSE:MINDTECK) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Mindteck (India) (NSE:MINDTECK) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Mindteck (India), this is the formula:

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

0.12 = ₹298m ÷ (₹3.0b - ₹496m) (Based on the trailing twelve months to September 2024).

Thus, Mindteck (India) has an ROCE of 12%. In absolute terms, that's a pretty normal return, and it's somewhat close to the IT industry average of 14%.

View 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're interested in investigating Mindteck (India)'s past further, check out this free graph covering Mindteck (India)'s past earnings, revenue and cash flow.

The Trend Of ROCE

Mindteck (India) has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 2,452% 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On Mindteck (India)'s ROCE

To bring it all together, Mindteck (India) has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 985% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Mindteck (India) can keep these trends up, it could have a bright future ahead.

Mindteck (India) does have some risks though, and we've spotted 4 warning signs for Mindteck (India) that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.