Why Wendt (India)’s (NSE:WENDT) 21% return on capital should grab your attention

If you’re not sure where to start when looking for the next multi-bagger, there are a few key trends you should watch out for. Ideally, a business will show two trends; first growth to return to on capital employed (ROCE) and on the other hand, growth amount capital employed. If you see this, it usually means it’s a company with a great business model and lots of profitable reinvestment opportunities. With this in mind, the ROCE of Wendt (India) (NSE:WENDT) is looking great, so let’s see what the trend can tell us.

Understanding return on capital employed (ROCE)

Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on Wendt (India) is:

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

0.21 = ₹316 million ÷ (₹1.9 billion – ₹355 million) (Based on the last twelve months to December 2021).

So, Wendt (India) has a ROCE of 21%. This is a fantastic return and not only that, it exceeds the 15% average earned by companies in a similar industry.

See our latest analysis for Wendt (India)

NSEI:WENDT Return on Capital Employed April 9, 2022

Historical performance is a great starting point when researching a stock. So you can see above the ROCE gauge of Wendt (India) compared to its past returns. If you want to dive into the history of Wendt (India) earnings, revenue and cash flow, check out these free graphics here.

The ROCE trend

Investors would be happy with what is happening in Wendt (India). Data shows that capital returns have increased significantly over the past five years to 21%. The company is actually making more money per dollar of capital used, and it’s worth noting that the amount of capital has also increased by 27%. So we’re very inspired by what we’re seeing in Wendt (India) with its ability to reinvest capital profitably.

The basics of Wendt’s ROCE (India)

To sum up, Wendt (India) has proven that he can reinvest in the business and generate higher returns on that capital employed, which is great. Given that the stock has returned a staggering 216% to shareholders over the past five years, it seems investors recognize these changes. That being said, we still think the promising fundamentals mean the company merits further due diligence.

If you want to know the risks facing Wendt (India), we have discovered 2 warning signs of which you should be aware.

Wendt (India) is not the only stock to generate high returns. If you want to see more, check out our free list of companies with high returns on equity with strong fundamentals.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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