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Slowing Rates Of Return At Adani Green Energy (NSE:ADANIGREEN) Leave Little Room For Excitement

Simply Wall St · 2d ago

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Adani Green Energy (NSE:ADANIGREEN), it didn't seem to tick all of these boxes.

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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. To calculate this metric for Adani Green Energy, this is the formula:

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

0.066 = ₹72b ÷ (₹1.3t - ₹172b) (Based on the trailing twelve months to September 2025).

So, Adani Green Energy has an ROCE of 6.6%. On its own, that's a low figure but it's around the 6.0% average generated by the Renewable Energy industry.

Check out our latest analysis for Adani Green Energy

roce
NSEI:ADANIGREEN Return on Capital Employed January 8th 2026

In the above chart we have measured Adani Green Energy's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Adani Green Energy for free.

What Does the ROCE Trend For Adani Green Energy Tell Us?

In terms of Adani Green Energy's historical ROCE trend, it doesn't exactly demand attention. The company has employed 421% more capital in the last five years, and the returns on that capital have remained stable at 6.6%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On Adani Green Energy's ROCE

In conclusion, Adani Green Energy has been investing more capital into the business, but returns on that capital haven't increased. Unsurprisingly, the stock has only gained 11% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

Adani Green Energy does have some risks though, and we've spotted 2 warning signs for Adani Green Energy that you might be interested in.

While Adani Green Energy 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.