Returns On Capital Are A Standout For Premier Energies (NSE:PREMIERENE)

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. With that in mind, the ROCE of Premier Energies (NSE:PREMIERENE) looks great, so lets see what the trend can tell us.

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

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. To calculate this metric for Premier Energies, this is the formula:

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

0.32 = ₹16b ÷ (₹77b - ₹29b) (Based on the trailing twelve months to September 2025).

So, Premier Energies has an ROCE of 32%. That's a fantastic return and not only that, it outpaces the average of 27% earned by companies in a similar industry.

View our latest analysis for Premier Energies

Above you can see how the current ROCE for Premier Energies 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 Premier Energies .

The Trend Of ROCE

The trends we've noticed at Premier Energies are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 32%. Basically the business is earning more per dollar of capital invested and in addition to that, 796% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Premier Energies' ROCE

To sum it up, Premier Energies has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Astute investors may have an opportunity here because the stock has declined 36% in the last year. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a separate note, we've found 1 warning sign for Premier Energies you'll probably want to know about.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.