ROE & ROCE: The Two Numbers That Reveal a Great Business

If you could keep only two fundamental metrics, professional investors would overwhelmingly keep these two. They measure the same deep thing from two angles: how efficiently does this business turn money into profit?

ROE — Return on Equity

Net profit ÷ shareholders' money, ×100. An ROE of 20% means every ₹100 of owners' capital generated ₹20 of profit this year. Since retained profits compound, a durable 20% ROE business roughly doubles its own capital every four years — *that* is where multi-bagger stories mathematically come from. Rough Indian yardsticks: below 10% mediocre, 15%+ good, 20%+ excellent — *if sustained*.

ROCE — the debt-adjusted truth

ROE has a blind spot: leverage. Borrow heavily and even a mediocre business can flatter its ROE, because the "equity" denominator shrinks relative to the profit engine. ROCE fixes this by measuring operating profit against *all* capital — equity and debt. A company with ROE 22% but ROCE 9% is telling you its returns are manufactured by borrowing, not by business quality.

The pattern to hunt: ROE and ROCE both high and close together — say 20% and 19%. That's genuine efficiency with no financial steroids.

Where to find them on SelectStock

Both sit in every stock's Key Ratios. Where our data source doesn't publish them, we compute them ourselves from the company's own statements (profit ÷ equity; operating profit ÷ equity+debt). And note the honest edge case: with negative shareholder equity, ROE is mathematically meaningless — we show "—" with an explanation instead of inventing a number.

Screen for ROE ≥ 18 *and* ROCE ≥ 15 in the screener and you'll have distilled the market to its genuinely well-run businesses in one click.