Adani Ports and Special Economic Zone (NSE:ADANIPORTS) Is Experiencing Growth In Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So when we looked at Adani Ports and Special Economic Zone (NSE:ADANIPORTS) and its trend of ROCE, we really liked what we saw.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Adani Ports and Special Economic Zone is:

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

0.12 = ₹140b ÷ (₹1.4t - ₹210b) (Based on the trailing twelve months to March 2025).

Thus, Adani Ports and Special Economic Zone has an ROCE of 12%. By itself that's a normal return on capital and it's in line with the industry's average returns of 12%.

See our latest analysis for Adani Ports and Special Economic Zone

In the above chart we have measured Adani Ports and Special Economic Zone's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Adani Ports and Special Economic Zone for free.

What The Trend Of ROCE Can Tell Us

Adani Ports and Special Economic Zone is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 12%. Basically the business is earning more per dollar of capital invested and in addition to that, 110% more capital is being employed now too. So we're very much inspired by what we're seeing at Adani Ports and Special Economic Zone thanks to its ability to profitably reinvest capital.

The Bottom Line On Adani Ports and Special Economic Zone's ROCE

In summary, it's great to see that Adani Ports and Special Economic Zone 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 Adani Ports and Special Economic Zone can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 2 warning signs with Adani Ports and Special Economic Zone and understanding these should be part of your investment process.

While Adani Ports and Special Economic Zone 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.