Return on Capital Employed (ROCE) is a profitability ratio that depicts the company’s ability to efficiently utilize its capital, including both debts and equity.
ROCE is determined by dividing earnings before interest and taxes (EBIT) by capital employed. In a ROCE calculation, capital employed refers to the total assets of the Company after all liabilities have been deducted.
A higher ROCE ratio is favorable because it defines the company’s ability to generate more profits on each rupee of capital invested. The ROCE ratio can be used to compare organizations in the same sector or industry. This is useful in determining which company spends its funds most efficiently in order to generate healthy returns.
Here are three midcap stocks with ROCEs of up to 53% that are below Rs 150.
NMDC Ltd
On Tuesday, NMDC Ltd shares were trading at Rs 124 a share, up 1.23 percent from the previous close price, for a market capitalization of Rs 36,295 crore.
Profitability ratios are in a better position with a return on capital employed at 36.04 percent, the return on equity stands at 27.26 percent, and the company’s net profit margin stands at 31.35 percent.
The company’s revenue has increased by 13 percent year on year, from Rs 4,767 crore in Q1FY23 to Rs 5,394 crore in Q1FY24. During the same period, Net profit increased by 13 percent from Rs 1,467 crore to Rs 1,661 crore.
NMDC is involved in the exploration and production of Iron Ore, as well as the manufacturing and sale of Sponge Iron and the generation and sale of Wind Power.
Motherson Sumi Wiring India Ltd
Motherson Sumi Wiring India Ltd shares were trading at Rs 59.60 a share on Tuesday, down 0.92 percent from the previous close price and with a market capitalization of Rs 26,283 crore.
Profitability ratios are more favorable, with a return on capital employed at 53.41 percent, a return on equity at 39.83 percent, and a net profit margin of 6.9 percent.
The company’s revenue for the quarter ended June 30, 2023 (Q1FY24) is Rs 1,858 crore, an 11 percent increase from the previous year’s quarter of Rs 1,670 crore. The net profit decreased by around 2 percent to Rs 123 crore from Rs 125 crore in the previous year’s quarter.
Motherson Sumi Wiring India is a manufacturer of wiring harnesses, harness components, and other electric wires and it is a market leader in the Indian wiring harness industry with a market share of over 40 percent.
Suzlon Energy Ltd
Suzlon Energy Ltd shares were trading at Rs 24.65 a share on Tuesday, up 4.89 percent from the previous close price, and the company had a market capitalization of Rs 30,686 crore.
The company’s profitability ratios are in a better position, with a return on capital employed at 20.96 percent and a return on equity at 259.20 percent and the company’s net profit margin has improved to 48.35 percent.
The company’s revenue has decreased year on year, from Rs 1,380 crore in Q1FY23 to Rs 1,350 crore in Q1FY24. During the same period, Net profit decreased from Rs 2,432 crore to Rs 100 crore.
Suzlon Energy Ltd is a pioneer in providing end-to-end wind power solutions and a leader in wind energy in India and company offers turbines in customised versions.
Written by Omkar Chitnis
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