updated on 10 July 2018
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What is ROCE and How stock provide best returns
Return on capital employed (ROCE) is a financial ratio that measures a company’s profitability and the efficiency with which it uses capital. It takes time to build good businesses. And it requires company managements to set realistic goals while investors need to have the ability to spot such a business early to be able to capture that growth. The companies which maintained ROCE at over 15 per cent through past 10 years. Shares of these companies have rallied between 650 per cent and 2,400 per cent in this period.
Home appliance major TTK Prestige created humungous wealth for investors as well as for itself in last 10 years. The company has maintained a return on capital employed (RoCE) of over 15 per cent all this while; the stock has surged over 5,200 per cent to Rs 5,823 on July 3, 2018 from Rs 108.50 on the same day in 2008 and market capitalisation has grown from just Rs 123 crore to over Rs 6,500 crore. There are 19 other such companies which have a similar stellar record, if not better. On an average, these stocks have delivered 1,000 per cent return since July 2008. HDFC Bank is one, and even the average investor has been able to notice that. Others include Balkrishna Industries, Kansai Nerolac, Bajaj Auto, Tata Elxsi, Asian Paints, Dabur India, Tata Consultancy Services (TCS) and Rallis India.
Other stocks that fulfil the criteria of a minimum of 15 per cent RoCE year after year for last 10 years and over Rs 100 crore market capitalisation as of July 2008 include Empire Industries, Zee Entertainment, Colgate-Palmolive, Lakshmi Machine WorksNSE 2.00 %, Hero MotoCorp, ITC, KEC International, Wendt (India), Infosys and Wipro. Shares of these companies have rallied between 100 per cent and 550 per cent during this period.