The Return Trends At Apollo Hospitals Enterprise (NSE:APOLLOHOSP) Look Promising

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Apollo Hospitals Enterprise (NSE:APOLLOHOSP) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Apollo Hospitals Enterprise, this is the formula:

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

0.13 = ₹14b ÷ (₹144b - ₹33b) (Based on the trailing twelve months to March 2023).

So, Apollo Hospitals Enterprise has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 14% generated by the Healthcare industry.

Check out our latest analysis for Apollo Hospitals Enterprise

In the above chart we have measured Apollo Hospitals Enterprise's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Apollo Hospitals Enterprise.

How Are Returns Trending?

The trends we've noticed at Apollo Hospitals Enterprise are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 13%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 58%. So we're very much inspired by what we're seeing at Apollo Hospitals Enterprise thanks to its ability to profitably reinvest capital.

What We Can Learn From Apollo Hospitals Enterprise's ROCE

To sum it up, Apollo Hospitals Enterprise has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 437% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, Apollo Hospitals Enterprise does come with some risks, and we've found 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.