Investors Should Be Encouraged By Elgi Equipments' (NSE:ELGIEQUIP) Returns On Capital

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Elgi Equipments' (NSE:ELGIEQUIP) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Elgi Equipments is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.22 = ₹4.6b ÷ (₹32b - ₹11b) (Based on the trailing twelve months to September 2025).

So, Elgi Equipments has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 15% earned by companies in a similar industry.

See our latest analysis for Elgi Equipments

In the above chart we have measured Elgi Equipments' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Elgi Equipments .

What Does the ROCE Trend For Elgi Equipments Tell Us?

The trends we've noticed at Elgi Equipments are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 22%. The amount of capital employed has increased too, by 120%. So we're very much inspired by what we're seeing at Elgi Equipments thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, Elgi Equipments has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 285% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for ELGIEQUIP that compares the share price and estimated value.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.