Returns Are Gaining Momentum At Nava (NSE:NAVA)
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. So on that note, Nava (NSE:NAVA) looks quite promising in regards to its trends of return on capital.
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. The formula for this calculation on Nava is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = ₹14b ÷ (₹125b - ₹5.8b) (Based on the trailing twelve months to September 2025).
So, Nava has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.
Check out our latest analysis for Nava
Historical performance is a great place to start when researching a stock so above you can see the gauge for Nava's ROCE against it's prior returns. If you'd like to look at how Nava has performed in the past in other metrics, you can view this free graph of Nava's past earnings, revenue and cash flow.
What Does the ROCE Trend For Nava Tell Us?
We like the trends that we're seeing from Nava. Over the last five years, returns on capital employed have risen substantially to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 52% more capital is being employed now too. So we're very much inspired by what we're seeing at Nava thanks to its ability to profitably reinvest capital.
One more thing to note, Nava has decreased current liabilities to 4.7% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. This tells us that Nava has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.
The Bottom Line
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Nava has. And a remarkable 1,924% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Nava does have some risks though, and we've spotted 1 warning sign for Nava that you might be interested in.
While Nava isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.