There's Been No Shortage Of Growth Recently For Hindalco Industries' (NSE:HINDALCO) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Hindalco Industries (NSE:HINDALCO) looks quite promising in regards to its trends of return on capital.

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Understanding 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. To calculate this metric for Hindalco Industries, this is the formula:

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

0.12 = ₹249b ÷ (₹2.7t - ₹655b) (Based on the trailing twelve months to March 2025).

Therefore, Hindalco Industries has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 13% generated by the Metals and Mining industry.

Check out our latest analysis for Hindalco Industries

In the above chart we have measured Hindalco Industries' 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 analyst report for Hindalco Industries .

The Trend Of ROCE

We like the trends that we're seeing from Hindalco Industries. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. The amount of capital employed has increased too, by 52%. So we're very much inspired by what we're seeing at Hindalco Industries thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Hindalco Industries is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 373% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Hindalco Industries can keep these trends up, it could have a bright future ahead.

If you want to continue researching Hindalco Industries, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Hindalco Industries 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.