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InnovAge Holding (NASDAQ:INNV) Might Be Having Difficulty Using Its Capital Effectively

Simply Wall St · 2d ago

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. Having said that, from a first glance at InnovAge Holding (NASDAQ:INNV) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on InnovAge Holding is:

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

0.019 = US$7.2m ÷ (US$510m - US$138m) (Based on the trailing twelve months to September 2025).

So, InnovAge Holding has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Healthcare industry average of 11%.

See our latest analysis for InnovAge Holding

roce
NasdaqGS:INNV Return on Capital Employed December 13th 2025

Above you can see how the current ROCE for InnovAge Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for InnovAge Holding .

What The Trend Of ROCE Can Tell Us

On the surface, the trend of ROCE at InnovAge Holding doesn't inspire confidence. Over the last five years, returns on capital have decreased to 1.9% from 21% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

The Key Takeaway

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for InnovAge Holding. These growth trends haven't led to growth returns though, since the stock has fallen 20% over the last three years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

Like most companies, InnovAge Holding does come with some risks, and we've found 2 warning signs that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.