Return on Capital Employed

The Return on Capital Employed, or ROCE, measures how effectively a company uses its total capital employed to generate income. It is calculated as the Operating Income divided by the Capital Employed. This is measured as an average of all available historical values.

Stockopedia explains ROCE

We calculate this as Operating Income (more or less EBIT) divided by Capital Employed which we define as Fixed Assets + Working Capital or, said another way, Total Assets minus Total Current Liabilities.

For the avoidance of doubt, this operating income number is stated post exceptionals because of the scope for manipulation and/or managerial subjectivity and discretion in the exceptional items number (companies tend to highlight exceptional losses but not exceptional gains).

It is also stated post the amortisation of intangibles, and intangibles are correspondingly included in the capital employed figure (this is debatable and there's a good Signet discussion piece on it here - but it's worth remembering that not all intangibles are goodwill and do often relate to the productive capacity of the firm). We also provide Greenblatt ROC which measures the return on tangible capital only.

A high double digit figure often means that the company has a defensible edge versus its competitors (e.g. a strong brand or a unique product). However, because ROCE measures return against the book value of assets, it's worth being aware that depreciation can affect ROCE even if cash flow is constant. This is not the case with ROIC.

Ranks: High to LowUnit: %Available in screenerAvailable as Table Column

The 5 highest ROCE Stocks in the Market

TickerNameROCEStockRank™
NMQ:PROCProcaps SA62385.3379
NYQ:MIRMirion Technologies53330.8359
NMQ:GCMGGCM Grosvenor27480.3871
FRA:LEHLehner Investments AG7728.088
NYQ:NRTNorth European Oil Royalty Trust5832.5786