ROCE (return on capital employed) measures operating profit against the total capital tied up in the business. It answers: for every Rs 100 invested in this company, how much operating profit comes back each year?
Sustained ROCE above 15–20% usually marks a genuine moat - pricing power, asset lightness or scale. Below ~10%, the business likely destroys value once its cost of capital is counted.
Example
Two railway suppliers earn the same profit, but one uses half the factories and working capital. Its ROCE is double - and it can fund growth without borrowing.
In Ticker Screener
ROCE pairs with P/E to build the AI Verdict: cheap (low P/E) plus efficient (high ROCE) flags possible bargains; expensive plus weak ROCE flags risk.
Frequently asked questions
ROCE vs ROE - what's the difference?
ROCE counts all capital including debt; ROE counts only shareholder equity. ROCE is harder to inflate with borrowing, so quality investors prefer it.
Related terms
ROE
Return on equity: profit earned per rupee of shareholder money. High and stable ROE compounds wealth.
P/E Ratio
Price-to-earnings: what you pay for each rupee or dollar of yearly profit. The starting lens for cheap vs expensive.
P/B Ratio
Price-to-book: market price versus net asset value per share. The classic yardstick for banks and asset-heavy firms.
P/E, ROCE, ROE, P/B, dividend yield and market cap — live beside every price in your watchlist.