Returns At InterGlobe Aviation (NSE:INDIGO) Are On The Way Up

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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 InterGlobe Aviation (NSE:INDIGO) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for InterGlobe Aviation:

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

0.13 = ₹110b ÷ (₹1.2t - ₹342b) (Based on the trailing twelve months to March 2025).

So, InterGlobe Aviation has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 8.4% generated by the Airlines industry.

View our latest analysis for InterGlobe Aviation

In the above chart we have measured InterGlobe Aviation'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 InterGlobe Aviation for free.

What Does the ROCE Trend For InterGlobe Aviation Tell Us?

We like the trends that we're seeing from InterGlobe Aviation. The data shows that returns on capital have increased substantially over the last five years to 13%. The amount of capital employed has increased too, by 218%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From InterGlobe Aviation's ROCE

To sum it up, InterGlobe Aviation has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 518% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if InterGlobe Aviation can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for INDIGO on our platform that is definitely worth checking out.

While InterGlobe Aviation 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.