Capital Allocation Trends At Standard Engineering Technology (NSE:SETL) Aren’t Ideal

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. However, after investigating Standard Engineering Technology (NSE:SETL), we don’t think it’s current trends fit the mold of a multi-bagger.

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

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 Standard Engineering Technology:

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

0.12 = ₹940m ÷ (₹12b – ₹3.8b) (Based on the trailing twelve months to September 2025).

So, Standard Engineering Technology has an ROCE of 12%. In absolute terms, that’s a pretty normal return, and it’s somewhat close to the Machinery industry average of 15%.

Check out our latest analysis for Standard Engineering Technology

NSEI:SETL Return on Capital Employed January 26th 2026

Historical performance is a great place to start when researching a stock so above you can see the gauge for Standard Engineering Technology’s 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 Standard Engineering Technology.

How Are Returns Trending?

In terms of Standard Engineering Technology’s historical ROCE movements, the trend isn’t fantastic. To be more specific, ROCE has fallen from 42% over the last three years. Meanwhile, the business is utilizing more capital but this hasn’t moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

On a related note, Standard Engineering Technology has decreased its current liabilities to 33% of total assets. So we could link some of this to the decrease in ROCE. What’s more, this can reduce some aspects of risk to the business because now the company’s suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business’ efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Bottom Line On Standard Engineering Technology’s ROCE

Bringing it all together, while we’re somewhat encouraged by Standard Engineering Technology’s reinvestment in its own business, we’re aware that returns are shrinking. Since the stock has declined 26% over the last year, investors may not be too optimistic on this trend improving either. In any case, the stock doesn’t have these traits of a multi-bagger discussed above, so if that’s what you’re looking for, we think you’d have more luck elsewhere.

Standard Engineering Technology could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for SETL on our platform quite valuable.

While Standard Engineering Technology 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.

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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.