If you’re not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we’d like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it’s a business that is reinvesting profits at increasing rates of return. So on that note, Olectra Greentech (NSE:OLECTRA) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
If you haven’t worked with ROCE before, it measures the ‘return’ (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Olectra Greentech:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.13 = ₹1.3b ÷ (₹16b – ₹6.1b) (Based on the…
