Investors Met With Slowing Returns on Capital At Aeroflex Industries (NSE:AEROFLEX)

There are a few key trends to look for if we want to identify the next multi-bagger. 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. So, when we ran our eye over Aeroflex Industries' (NSE:AEROFLEX) trend of ROCE, we liked what we saw.

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What Is 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 Aeroflex Industries is:

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

0.17 = ₹636m ÷ (₹4.7b - ₹996m) (Based on the trailing twelve months to September 2025).

Thus, Aeroflex Industries has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 12% generated by the Metals and Mining industry.

See our latest analysis for Aeroflex Industries

Historical performance is a great place to start when researching a stock so above you can see the gauge for Aeroflex Industries' ROCE against it's prior returns. If you'd like to look at how Aeroflex Industries has performed in the past in other metrics, you can view this free graph of Aeroflex Industries' past earnings, revenue and cash flow.

What Can We Tell From Aeroflex Industries' ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 297% more capital in the last five years, and the returns on that capital have remained stable at 17%. 17% is a pretty standard return, and it provides some comfort knowing that Aeroflex Industries has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

On a side note, Aeroflex Industries has done well to reduce current liabilities to 21% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Bottom Line On Aeroflex Industries' ROCE

The main thing to remember is that Aeroflex Industries has proven its ability to continually reinvest at respectable rates of return. Despite the good fundamentals, total returns from the stock have been virtually flat over the last year. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One more thing, we've spotted 1 warning sign facing Aeroflex Industries that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.