Slowing Rates Of Return At NTPC Green Energy (NSE:NTPCGREEN) Leave Little Room For Excitement

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at NTPC Green Energy (NSE:NTPCGREEN), it didn't seem to tick all of these boxes.

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What Is 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. Analysts use this formula to calculate it for NTPC Green Energy:

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

0.028 = ₹12b ÷ (₹484b - ₹47b) (Based on the trailing twelve months to September 2025).

Therefore, NTPC Green Energy has an ROCE of 2.8%. In absolute terms, that's a low return and it also under-performs the Renewable Energy industry average of 6.0%.

View our latest analysis for NTPC Green Energy

Above you can see how the current ROCE for NTPC Green Energy compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for NTPC Green Energy .

What Can We Tell From NTPC Green Energy's ROCE Trend?

The returns on capital haven't changed much for NTPC Green Energy in recent years. The company has consistently earned 2.8% for the last two years, and the capital employed within the business has risen 142% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

One more thing to note, even though ROCE has remained relatively flat over the last two years, the reduction in current liabilities to 9.7% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

What We Can Learn From NTPC Green Energy's ROCE

Long story short, while NTPC Green Energy has been reinvesting its capital, the returns that it's generating haven't increased. And investors appear hesitant that the trends will pick up because the stock has fallen 30% in the last year. Therefore based on the analysis done in this article, we don't think NTPC Green Energy has the makings of a multi-bagger.

On a separate note, we've found 2 warning signs for NTPC Green Energy you'll probably want to know about.

While NTPC Green Energy 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.