By Suhel Khan
Return on Capital Employed (ROCE) is an important metric that investors must take into consideration when evaluating a company’s performance.
Now, please do not confuse the ROCE with growth.
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Growth refers to a company’s ability to increase its revenue and earnings over time. This can be achieved through ways like market expansion, new product launches, and acquisitions. While growth is seen as a positive sign, growth can sometimes come at the expense of profitability. Even long-term profitability.
ROCE on the other hand measures a company’s efficiency in generating profits from its invested capital. It is calculated by dividing operating profit by total capital employed. A high ROCE indicates that a company is effectively utilizing its resources to generate returns for its shareholders.
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Effective capital allocation is especially important when it comes ROCE. While growth is expected, the market give emphasis on the importance of sustainable growth. Blindly pursuing growth without considering ROCE could lead to a lower valuation and therefore a lower market value. True value creation lies in achieving growth that is both efficient and sustainable.
To explain it simply, if a company spends Rs 100 as capital expenditure, the money it makes on it is determines the ROCE percentage.
If it spends Rs 100 and makes 90 on it, the ROCE will be 90%.
Here are 3 companies that could be called “Kings of Capital Efficiency” you can consider adding to your watch list.
Ksolves India Ltd
Ksolves is a 360-degree software solution provider, known in the industry for its expertise in Big Data (Apache Kafka, Apache NiFi, Apache Spark, Apache Cassandra), Data Science (Artificial Intelligence & Machine Learning), Salesforce, DevOps, Java & Microservices, OpenShift, Penetration Testing etc.
With a market cap of Rs 1,114 cr, Ksolves focusses on Data Sciences/Big Data/Al &
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