Returns At MRO-TEK Realty (NSE:MRO-TEK) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at MRO-TEK Realty (NSE:MRO-TEK) so let's look a bit deeper.

Understanding 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. The formula for this calculation on MRO-TEK Realty is:

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

0.07 = ₹140m ÷ (₹2.1b - ₹129m) (Based on the trailing twelve months to September 2024).

Thus, MRO-TEK Realty has an ROCE of 7.0%. In absolute terms, that's a low return and it also under-performs the Communications industry average of 9.5%.

View our latest analysis for MRO-TEK Realty

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

How Are Returns Trending?

We're delighted to see that MRO-TEK Realty is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 7.0% on its capital. And unsurprisingly, like most companies trying to break into the black, MRO-TEK Realty is utilizing 3,491% 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.

One more thing to note, MRO-TEK Realty has decreased current liabilities to 6.0% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

The Key Takeaway

In summary, it's great to see that MRO-TEK Realty has managed to break into profitability and is continuing to reinvest in its business. And a remarkable 134% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.

One more thing: We've identified 2 warning signs with MRO-TEK Realty (at least 1 which is potentially serious) , and understanding them would certainly be useful.

While MRO-TEK Realty 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.