ROCE: The King of Quality Metrics – Finding Quality Compounders in Indian Stock Market

ROCE: The King of Quality Metrics in Value Investing

Return on Capital Employed (ROCE) is one of the most powerful metrics for identifying quality businesses. It measures how efficiently a company generates profits from its total capital — both equity and debt.

What is ROCE?

ROCE = EBIT / Capital Employed

Where Capital Employed = Total Assets – Current Liabilities

Why ROCE Matters More Than ROE

Unlike ROE, which only considers equity and can be inflated by high debt, ROCE accounts for all capital employed in the business. This gives investors a true picture of capital efficiency.

Case Study: Titan Biotech Ltd

Titan Biotech has shown an impressive ROCE trajectory:

• 2020: ~18% ROCE
• 2022: ~22% ROCE
• 2024: 25%+ ROCE (Excellent)

This consistent improvement signals strong management and competitive advantages.

ROCE Benchmarks

• Below 10%: Poor
• 10-15%: Average
• 15-25%: Good
• Above 25%: Excellent

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Manish Goel | Multibagger Securities Research & Advisory Pvt. Ltd. (INA100007736)

Visit: manishgoelstocks.com

For educational purposes only. Not investment advice.

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