TCI Express (NSE:TCIEXP) Is Investing Its Capital With Increasing Efficiency

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. And in light of that, the trends we're seeing at TCI Express' (NSE:TCIEXP) look very promising so lets take a look.

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. To calculate this metric for TCI Express, this is the formula:

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

0.35 = ₹1.7b ÷ (₹5.9b - ₹972m) (Based on the trailing twelve months to September 2021).

Thus, TCI Express has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Logistics industry average of 16%.

Check out our latest analysis for TCI Express

Historical performance is a great place to start when researching a stock so above you can see the gauge for TCI Express' ROCE against it's prior returns. If you're interested in investigating TCI Express' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is TCI Express' ROCE Trending?

The trends we've noticed at TCI Express are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 35%. The amount of capital employed has increased too, by 239%. So we're very much inspired by what we're seeing at TCI Express thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 16%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that TCI Express has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

Our Take On TCI Express' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what TCI Express has. And a remarkable 661% 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 final note, you should learn about the 2 warning signs we've spotted with TCI Express (including 1 which is a bit concerning) .

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.