Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we’ll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Speaking of which, we noticed some great changes in MakeMyTrip’s (NASDAQ:MMYT) returns on capital, so let’s have a look.
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. To calculate this metric for MakeMyTrip, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.066 = US$96m ÷ (US$1.8b – US$364m) (Based on the trailing twelve months to December 2024).
Thus, MakeMyTrip has an ROCE of 6.6%. …
