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    Returns On Capital At RailTel Corporation of India (NSE:RAILTEL) Have Stalled

    Simply Wall St·12/26/2025 01:13:57
    語音播報

    If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. With that in mind, the ROCE of RailTel Corporation of India (NSE:RAILTEL) looks decent, right now, so lets see what the trend of returns can tell us.

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    Understanding Return On Capital Employed (ROCE)

    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. Analysts use this formula to calculate it for RailTel Corporation of India:

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

    0.16 = ₹4.0b ÷ (₹51b - ₹26b) (Based on the trailing twelve months to September 2025).

    Therefore, RailTel Corporation of India has an ROCE of 16%. That's a pretty standard return and it's in line with the industry average of 16%.

    See our latest analysis for RailTel Corporation of India

    roce
    NSEI:RAILTEL Return on Capital Employed December 26th 2025

    In the above chart we have measured RailTel Corporation of India's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering RailTel Corporation of India for free.

    What Can We Tell From RailTel Corporation of India's ROCE Trend?

    While the current returns on capital are decent, they haven't changed much. The company has consistently earned 16% for the last five years, and the capital employed within the business has risen 58% in that time. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

    Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn't increased to 52% of total assets, this reported ROCE would probably be less than16% because total capital employed would be higher.The 16% ROCE could be even lower if current liabilities weren't 52% of total assets, because the the formula would show a larger base of total capital employed. Additionally, this high level of current liabilities isn't ideal because it means the company's suppliers (or short-term creditors) are effectively funding a large portion of the business.

    The Bottom Line

    The main thing to remember is that RailTel Corporation of India has proven its ability to continually reinvest at respectable rates of return. On top of that, the stock has rewarded shareholders with a remarkable 195% return to those who've held over the last three years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

    On a final note, we found 2 warning signs for RailTel Corporation of India (1 doesn't sit too well with us) you should be aware of.

    While RailTel Corporation of India may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.