Investors Could Be Concerned With D.P. Wires' (NSE:DPWIRES) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at D.P. Wires (NSE:DPWIRES) and its ROCE trend, we weren't exactly thrilled.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for D.P. Wires:

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

0.05 = ₹127m ÷ (₹2.7b - ₹199m) (Based on the trailing twelve months to September 2025).

Therefore, D.P. Wires has an ROCE of 5.0%. In absolute terms, that's a low return and it also under-performs the Metals and Mining industry average of 12%.

Check out our latest analysis for D.P. Wires

Historical performance is a great place to start when researching a stock so above you can see the gauge for D.P. Wires' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of D.P. Wires.

So How Is D.P. Wires' ROCE Trending?

In terms of D.P. Wires' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 21% over the last five years. And considering revenue has dropped while employing more capital, we'd be cautious. If this were to continue, you might be looking at a company that is trying to reinvest for growth but is actually losing market share since sales haven't increased.

The Bottom Line On D.P. Wires' ROCE

In summary, we're somewhat concerned by D.P. Wires' diminishing returns on increasing amounts of capital. Since the stock has skyrocketed 189% over the last five years, it looks like investors have high expectations of the stock. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

On a separate note, we've found 2 warning signs for D.P. Wires you'll probably want to know about.

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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.