Returns On Capital Are Showing Encouraging Signs At Narayana Hrudayalaya (NSE:NH)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at Narayana Hrudayalaya (NSE:NH) so let's look a bit deeper.

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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 Narayana Hrudayalaya is:

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

0.17 = ₹10b ÷ (₹73b - ₹12b) (Based on the trailing twelve months to June 2025).

So, Narayana Hrudayalaya has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Healthcare industry average of 12% it's much better.

See our latest analysis for Narayana Hrudayalaya

In the above chart we have measured Narayana Hrudayalaya's 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 Narayana Hrudayalaya .

The Trend Of ROCE

Investors would be pleased with what's happening at Narayana Hrudayalaya. Over the last five years, returns on capital employed have risen substantially to 17%. 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 165%. So we're very much inspired by what we're seeing at Narayana Hrudayalaya thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that Narayana Hrudayalaya can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Narayana Hrudayalaya can keep these trends up, it could have a bright future ahead.

While Narayana Hrudayalaya looks impressive, no company is worth an infinite price. The intrinsic value infographic for NH helps visualize whether it is currently trading for a fair price.

While Narayana Hrudayalaya may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.