There's Been No Shortage Of Growth Recently For ExlService Holdings' (NASDAQ:EXLS) Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, ExlService Holdings (NASDAQ:EXLS) looks quite promising in regards to its trends of return on capital.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for ExlService Holdings, this is the formula:

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

0.18 = US$247m ÷ (US$1.6b - US$254m) (Based on the trailing twelve months to September 2024).

Thus, ExlService Holdings has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Professional Services industry average of 15% it's much better.

View our latest analysis for ExlService Holdings

Above you can see how the current ROCE for ExlService Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering ExlService Holdings for free.

So How Is ExlService Holdings' ROCE Trending?

The trends we've noticed at ExlService Holdings are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 41% more capital is being employed now too. So we're very much inspired by what we're seeing at ExlService Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line On ExlService Holdings' ROCE

To sum it up, ExlService Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 225% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, ExlService Holdings does come with some risks, and we've found 1 warning sign that you should be aware of.

While ExlService Holdings 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.