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Returns On Capital At MITCON Consultancy & Engineering Companies (NSE:MITCON) Have Stalled

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When looking for a multi-excavator there are a few things to look out for. First of all, we would like to determine a growing return on capital employed (ROCE) and, at the same time, a constantly growing base of the capital employed. When you see this, it usually means that it is a company with a great business model and numerous profitable reinvestment opportunities. However, after the investigation MITCON Consultancy & Engineering Services (NSE: MITCON), we don’t think current trends fit into the shape of a multi-excavator.

Return on Capital Employed (ROCE): What is it?

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (rate of return) in relation to the capital employed in the company. The formula for this calculation for MITCON Consultancy & Engineering Services is:

Return on investment = earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.048 = £ 81m (£ 1.9bn – £ 250m) (based on the last 12 months ended March 2020).

So, MITCON Consultancy & Engineering Services has a ROCE of 4.8%. Ultimately, this is a low return and is below the professional services industry average of 8.4%.

Check out our latest analysis for MITCON Consultancy & Engineering Services

NSEI: MITCON Return on Capital Employed May 28, 2021

Historical performance is a good place to start when studying a stock, so above you can see the measure of MITCON Consultancy & Engineering Services ROCE based on previous returns. If you want to see how MITCON Consultancy & Engineering Services has done in the past on other metrics, you can view this free Graph of past profits, sales and cash flow.

What are the return trends?

In terms of MITCON Consultancy & Engineering Services’ historic ROCE trend, this doesn’t necessarily require attention. The company has earned a steady 4.8% over the past five years, and the company’s capital has increased 89% over that time. This poor ROCE is currently not building confidence, and given the increase in capital employed, it is evident that the company is not using the funds on high-return investments.

Finally…

In conclusion, MITCON Consultancy & Engineering Services has invested more capital in the business, but the return on that capital has not increased. And investors seem hesitant that trends will accelerate, as the stock has fallen 33% over the past three years. In any case, the stock does not have the characteristics of a multi-excavator described above. So if that’s what you’re looking for, you’re likely to have better luck elsewhere.

If you want to learn more about MITCON Consultancy & Engineering Services, we’ve discovered 5 warning signs, and 2 of them cannot be ignored.

For those who like to invest solid companies, look at that free List of companies with solid balance sheets and high returns on equity.

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