Returns At WNS (Holdings) (NYSE:WNS) Are On The Way Up
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. So when we looked at WNS (Holdings) (NYSE:WNS) and its trend of ROCE, we really liked what we saw.
Understanding 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. Analysts use this formula to calculate it for WNS (Holdings):
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = US$180m ÷ (US$1.2b - US$237m) (Based on the trailing twelve months to September 2022).
So, WNS (Holdings) has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 12% generated by the IT industry.
Check out our latest analysis for WNS (Holdings)
Above you can see how the current ROCE for WNS (Holdings) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for WNS (Holdings).
What Does the ROCE Trend For WNS (Holdings) Tell Us?
The trends we've noticed at WNS (Holdings) are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 74%. So we're very much inspired by what we're seeing at WNS (Holdings) thanks to its ability to profitably reinvest capital.
In Conclusion...
To sum it up, WNS (Holdings) has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 99% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if WNS (Holdings) can keep these trends up, it could have a bright future ahead.
While WNS (Holdings) looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether WNS is currently trading for a fair price.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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