Calculate your SIP ReturnsExplore

High ROCE Stocks for Long-Term High Returns!

30 May 20236 mins read by Angel One
Over the past five years, Adani Total Gas Ltd has achieved an impressive absolute return exceeding 700%, coupled with a five-year ROCE standing at 26%.
High ROCE Stocks for Long-Term High Returns!
ShareShare on 1Share on 2Share on 3Share on 4Share on 5

ROCE, which stands for Return on Capital Employed, is a financial ratio utilized to evaluate a company’s profitability and efficiency in utilizing its capital investments. It measures how effectively a company generates profits from the capital it has employed, encompassing both equity and debt.

Expressed as a percentage, ROCE represents the return achieved by the company for each unit of capital employed. A higher ROCE indicates greater efficiency in generating profits from capital investments, reflecting effective resource utilization and favourable returns. Conversely, a lower ROCE suggests inadequate capital utilization or unsatisfactory returns.

The trend of ROCE over time is a significant performance indicator for a company. Investors typically prefer companies that demonstrate consistent or increasing levels of ROCE, rather than companies with volatile or declining ROCE.

ROCE holds significant importance as a metric since it offers valuable insights into a company’s profitability, efficiency, and overall financial performance. It finds widespread use among investors, analysts, and management alike for purposes such as evaluating and comparing companies within an industry, making investment decisions, and assessing the effective utilization of capital.

There are more than 45 companies having market capitalisation over Rs 50,000 crore maintaining a good ROCE consistently over 15%.

Top 5 companies in India maintaining high ROCE in last 5 years

Name CMP Market Cap 52-Week High ROCE % 5 Yr ROCE % 5 Yr Stock Return
Nestle India 21536 207639 22300 137.75% 113.0% 118%
Coal India 245 150987 263 71.48% 67.4% -17%
TCS 3310 1211018 3575 59.11% 51.8% 91%
IRCTC 632 50556 775 58.99% 47.7% 305%
Britannia Inds. 4610 111031 4706 48.85% 43.6% 59%
 These 5 companies having very low ROCE in last 5 years
Name CMP Market Cap 52-Week High ROCE % 5 Yr ROCE % 5 Yr Stock Return
Godrej Consumer 1047 107118 1059 16.77% 18.7% 35%
Wipro 402 220614 488 17.71% 19.9% 106%
P I Industries 3506 53198 3699 21.66% 21.0% 320%
Tech Mahindra 1104 107535 1197 22.51% 24.0% 57%
ICICI Lombard 1178 57857 1369 21.20% 24.1% 63%

Top 10 companies have generated magnificent absolute returns over 5 years with ROCE over 15%:

Name CMP Market Cap 52-Week High ROCE % 5 Yr ROCE % 5 Yr Stock Return
Adani Total Gas 702 77256 4000 20.31% 25.8% 779%
Polycab India 3391 50787 3490 28.36% 26.2% 427%
P I Industries 3506 53198 3699 21.66% 21.0% 320%
IRCTC 632 50556 775 58.99% 47.7% 305%
Divi’s Lab. 3454 91698 3977 19.34% 27.6% 228%
Bharat Electron 112 81614 115 30.06% 28.3% 201%
Hind.Aeronautics 3093 103428 3169 30.60% 28.1% 200%
LTI Mindtree 5006 148095 5361 42.77% 39.8% 198%
HCL Technologies 1135 308110 1157 28.66% 27.3% 151%
Asian Paints 3143 301476 3590 35.30% 33.6% 143%

It is essential to consider that when evaluating ROCE, comparisons should be made within the same industry or sector. This is because different industries may have distinct capital requirements and expectations regarding profitability. Furthermore, to gain a comprehensive understanding of a company’s financial health, it is vital to take into account other financial ratios and metrics in conjunction with ROCE.

Enjoy Zero Brokerage on Equity Delivery
4.4 Cr+DOWNLOADS
Enjoy Zero Brokerage on Equity Delivery

Get the link to download the App

Send App Link

Enjoy Zero Brokerage on
Equity Delivery