Adani Power (NSE:ADANIPOWER) Is Doing The Right Things To Multiply Its Share Price

There are a few key trends to look for if we want to identify the next 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Adani Power (NSE:ADANIPOWER) looks quite promising in regards to its trends of return on capital.

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Return On Capital Employed (ROCE): What Is It?

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 Adani Power, this is the formula:

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

0.17 = ₹165b ÷ (₹1.1t - ₹164b) (Based on the trailing twelve months to June 2025).

So, Adani Power has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 5.9% generated by the Renewable Energy industry.

Check out our latest analysis for Adani Power

In the above chart we have measured Adani Power'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 Adani Power .

What The Trend Of ROCE Can Tell Us

Adani Power is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 17%. The amount of capital employed has increased too, by 70%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Adani Power's ROCE

All in all, it's terrific to see that Adani Power is reaping the rewards from prior investments and is growing its capital base. And a remarkable 2,191% 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 Adani Power can keep these trends up, it could have a bright future ahead.

Adani Power does have some risks though, and we've spotted 2 warning signs for Adani Power that you might be interested in.

While Adani Power isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.