Chapters in Fundamental Analysis
Chapter 4 of 7 · 5 min read
ROE vs ROCE for Indian stocks
Two profitability measures from different capital bases, and when each is the right lens.
ROE is net profit divided by shareholders' equity. ROCE is operating profit (EBIT) divided by capital employed, which is equity plus debt. Banks and lenders lean on ROE; capital-heavy industrials use ROCE to see whether debt-funded assets earn enough.
What good looks like
- Consistently above the cost of capital across years.
- ROE driven by margins and asset turns, not just leverage.
- ROCE stable or rising as the company grows.
Compare both within the same sector and check whether earnings are cyclical or one-off.
Key takeaways
- ROE = profit ÷ equity; ROCE = EBIT ÷ (equity + debt).
- High ROE from heavy debt is lower quality.
- Judge returns over multiple years, within a sector.
Put it into practice
Open the live page on Market Intelligence and see this concept on real data.
Keep learning
- Valuation ratios: P/E, P/B, EV/EBITDA, dividend yield · Fundamental Analysis
Education only, not investment advice. Updated 2026-10-09.