Slowing Rates Of Return At ACME Solar Holdings (NSE:ACMESOLAR) Leave Little Room For Excitement

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at ACME Solar Holdings (NSE:ACMESOLAR), 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. The formula for this calculation on ACME Solar Holdings is:

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

0.071 = ₹12b ÷ (₹204b - ₹30b) (Based on the trailing twelve months to September 2025).

Therefore, ACME Solar Holdings has an ROCE of 7.1%. On its own, that's a low figure but it's around the 6.0% average generated by the Renewable Energy industry.

View our latest analysis for ACME Solar Holdings

Above you can see how the current ROCE for ACME Solar Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering ACME Solar Holdings for free.

What Can We Tell From ACME Solar Holdings' ROCE Trend?

The returns on capital haven't changed much for ACME Solar Holdings in recent years. Over the past five years, ROCE has remained relatively flat at around 7.1% and the business has deployed 153% more capital into its operations. 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.

Our Take On ACME Solar Holdings' ROCE

As we've seen above, ACME Solar Holdings' returns on capital haven't increased but it is reinvesting in the business. And investors appear hesitant that the trends will pick up because the stock has fallen 13% in the last year. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with ACME Solar Holdings (including 2 which are significant) .

While ACME Solar Holdings 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.