Does the business deliver high returns on capital?
Return on capital employed (ROCE) is an important filter to consider when choosing a stock for the long-term. ROCE will ultimately determine whether the stock manages to produce compounded returns over many years or decades while remaining sheltered from market volatility.
If the business can deliver high returns year after year without the need to reinvest too much capital and without debts, that stock should be a cash-generating machine for investors.
