Return trends at India’s Power Grid Corporation (NSE: POWERGRID) look promising

What early trends should we look for to identify a stock that could double in value over the long term? First, we want to define growth return On Capital Employed (ROCE) Then besides, it is constantly increasing Base of working capital. Ultimately, this shows that the company is reinvesting profits at increasing rates of return. Speaking of which, we’ve noticed some big changes in Indian Power Grid Corporation (NSE: POWERGRID) is back on capital, so let’s take a look.

What is return on capital employed (ROCE)?

For those who don’t know, ROCE is a measure of a company’s annual profit before tax (its return), relative to the capital employed in the company. Analysts use this formula to calculate it for Power Grid Corporation in India:

Return on Capital Employed = EBIT √∑ (Total Assets – Current Liabilities)

0.11 = $244 billion (2.5 tons – $336 billion) (Based on subsequent twelve months through September 2022).

So, India’s Power Grid Corporation has an ROCE of 11%. That’s a record return in itself, but much better than the 7.3% generated by the electric utility industry.


NSEI: POWERGRID Return on Capital Employed November 25, 2022

In the chart above, we benchmark India’s Power Grid Corporation past ROCE against its past performance, but the future is arguably more important. If you like, you can check out analyst forecasts covering Power Grid Corporation in India here Free.

What the ROCE trend can tell us

Power Grid Corporation in India has not been disappointed with the growth of ROCE. Figures show that over the past five years, ROCE has grown by 27% while using roughly the same amount of capital. Basically, a business generates higher returns from the same amount of capital and this is evidence that there are improvements in the efficiencies of the company. The company is doing well in this sense, and it’s worth checking out what the management team has planned for its long-term growth prospects.

In conclusion…

In short, Power Grid Corporation in India is charging higher returns for the same amount of capital, which is impressive. And investors seem to expect more of this in the future, as the stock has rewarded shareholders with a 90% return over the past five years. So since the stock has proven to have promising trends, it’s worth doing more research on the company to see if those trends are likely to continue.

If you wish to continue researching Power Grid Corporation in India, you may be interested in knowing information about 2 warning signs discovered by our analysis.

If you want to look for solid companies with big profits, check this out Free List of companies with healthy balance sheets and impressive returns on equity.

Evaluation is complex, but we help make it simple.

Find out if Indian Power Grid Corporation potentially overvalued or undervalued by checking our comprehensive analysis, which includes Fair value estimates, risks and warnings, dividends, insider transactions and financial soundness.

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This article written by Simply Wall St is general in nature. We provide comments based on historical data and analyst predictions only using an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock, and it does not take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by fundamental data. Note that our analysis may not include the company’s most recent price-sensitive announcements or specific materials. Wall Street simply has no position in any of the stocks mentioned.

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