“5 Must-Watch Stocks Poised for Explosive Returns in 2025!”

Prior to investing in any stock, investors are encouraged to perform comprehensive evaluations, concentrating on the business, financials, management, and industry perspective. Among these factors, return ratios represent the most vital financial indicators to examine.

This ratio indicates how proficient a company is at converting its shareholders’ investments into additional profits.

If two firms each generated a revenue of ₹1 billion this year, but one needed an investment of ₹10 billion to generate that income while the other realized it with a mere ₹5 billion, it’s clear that the latter company operated more effectively and achieved better outcomes.

Recognizing the importance of return ratios, we present a carefully compiled list of high-return stocks that merit consideration for your portfolio in 2025.

Also read: High risk, high reward? Analyzing the surge in ITI

These stocks have been rigorously chosen based on their strong fundamentals and impressive return ratios, identifying them as appealing investment alternatives.

InterGlobe Aviation

InterGlobe Aviation serves as the parent entity for IndiGo, India’s foremost passenger airline in terms of domestic market share.

The airline operates using a low-cost carrier model, providing no-frills air travel to guests in both domestic and international markets. It initiated its operations in August 2006 with a singular aircraft.

Supported by Rahul Bhatia and Rakesh Gangwal, the firm was originally established in January 2004 as a private limited entity and transitioned to a public limited company in June 2006, becoming InterGlobe Aviation.

Later, IndiGo launched its IPO in 2016, leading to its shares being listed on both the BSE and the NSE.

Regarding its financial status, during the second quarter of FY25, revenues increased by 13.5% YoY to ₹169.7 billion. The operational profit for that quarter reached ₹16.1 billion, while the operating profit margin was recorded at 10%, compared to 15% in Q2 FY24.

At the net level, the organization noted a loss of ₹9.8 billion.

Here is a chart displaying the annual financial performance of the company.

In FY24, the company achieved an exceptional return on equity (RoE) of 423%, with the return on capital employed (RoCE) reported at 25%. Over the last three years, it has recorded an RoCE of 6%.

IndiGo is pushing forward with its growth strategy both domestically and internationally, aiming to establish itself as a prominent carrier in India by 2030 while expanding on a global scale.

Through upgraded digital platforms and new routes to destinations like Penang and Langkawi, it targets to capture an international capacity share of 30%. Domestically, it is enhancing pilot training via collaborations and new training centres.

Nestle

Nestle India Limited, a subsidiary of the Swiss giant Nestle, functions within the food industry. It maintains a leading role across major product categories such as dairy products, nutrition, beverages, prepared meals, cooking aids, and confectioneries.

Nestle boasts brands like Nescafe, Maggi, Milkybar, Kitkat, Bar-One, Milkmaid, Nestea, and many others. The company’s distribution network encompasses over 10,000 distributors and in excess of 5.2 million outlets. It generates 96% of its revenue from the domestic market, with the remaining 4% attributed to exports.

Focusing on financial performance, Nestle experienced modest net sales growth for the quarter ending September 2024 at 1.3% YoY, totaling ₹51 billion. The operating profit for the quarter amounted to ₹11.7 billion, with the operating profit margin reaching 23% YoY compared to 24% in Q2 FY24.

The net profit increased to ₹9.8 billion, compared to ₹9.1 billion during Q2 FY24. The net profit margin stood at 19.3%, up from 18% in Q2 FY24.

Below is the table showing annual financial performance of the company.

The return ratios for the company indicate an RoE and RoCE of 122% and 153%, respectively, in FY24. Over the past three-year span, the RoE for the firm has been an impressive 121%, while the RoCE has been at 152%.

Nestle’s management is hopeful about enhanced performance, driven by continuous rural growth, premium offerings, innovation, and operational efficiency. Under its RURBAN initiative, the company is broadening its presence in small towns and larger villages.

Also read: Another challenging year for consumer staples?

With 30 innovative projects in development, Nestle is concentrating on creativity by introducing diverse food products, including millet-based options for sustainability. It has also doubled its investments in sustainability across areas like dairy, plastics, and responsible sourcing.

Procter & Gamble Hygiene and Health Care

P&G Hygiene and Health Care represents the Indian branch of the American multinational Procter & Gamble.

It specializes in the production and marketing of branded packaged consumer items in the feminine hygiene and healthcare sectors, featuring renowned brands such as Whisper, Vicks, and Old Spice.

Regarding financial outcomes, the company’s revenue experienced a minor decline of 0.3% YoY, totaling ₹11.3 billion.

The operating profit reached ₹2.9 billion, compared to ₹2.8 billion in Q2 FY24. The operating profit margin for the quarter stood at 26%, versus 25%,in Q2 FY24.

The net income stayed unchanged at ₹2.1 billion. The net margin increased slightly to 18.7% compared to 18.5% in Q2 FY24.

Below is the table illustrating the annual financial performance of the corporation.

The RoE and RoCE for the corporation were recorded at 87% and 112%, respectively, in FY24. Over the last three years, the company’s RoE has averaged an impressive 80%, while its RoCE was noted at 108%.

The management emphasizes considerable opportunities in the rapid commerce sector, as demonstrated by a 22% surge in active users on prominent platforms. Despite broader economic uncertainties, the company holds confidence in its comprehensive growth strategy to adeptly manage market variability.

Moving forward, the company anticipates that the feminine care segment will sustain double-digit growth for the next three years. To realize this goal, it intends to focus on a balanced strategy that fosters revenue growth while preserving margins through innovation and efficiency improvements.

Tata Consultancy Services

TCS, the flagship entity of the Tata group, stands as a prominent IT services, consulting, and business solutions firm, collaborating with many of the globe’s largest enterprises.

As the largest software services provider in India, TCS delivers outsourcing services, caters to a varied clientele, and boasts a worldwide presence spanning six continents.

The corporation functions in vital business sectors, such as financial services, consumer business, healthcare and life sciences, manufacturing, and technology services. TCS partners with leading international conglomerates including Google, Amazon, Adobe, Intel, Bosch, IBM, and Apple, among others.

Also read: TCS’s outlook provides reassurance, but risks overshadow FY26 revenue expectations

Regarding its financial performance in Q2 FY25, TCS announced revenues of ₹642.6 billion, marking a 7.6% increase year-over-year. Performance metrics revealed that the BFSI, consumer business unit, and life sciences & healthcare segments each grew by 0.1%.

The energy, resources, and utility sectors grew by 7%, while regional markets displayed an impressive growth rate of 50.4%.

Conversely, manufacturing recorded a growth of 5.3%. Nevertheless, technology & services saw a decline of 1.9%, and communications & media experienced a notable downturn of 10.3%.

In terms of operating profit, the company reported growth to ₹167.3 billion, up from ₹157.4 billion in Q2 FY24. The operating profit margin, however, remained steady at 26%.

Overall, TCS managed to enhance its profit for the quarter by 5.1% year-over-year to ₹119.5 billion. The net profit margin for the quarter was recorded at 18.6% compared to 19.1% in Q2 FY24.

Below is the table illustrating the annual financial performance of the corporation.

The RoE and RoCE for the corporation stand at 51% and 64%, respectively, in FY24. Meanwhile, over the prior three years, RoE and RoCE were recorded at 47% and 59.1%, respectively.

During the quarter, TCS made substantial investments in AI, engaging in over 600 projects, of which 86 are currently operational.

Looking ahead, TCS aims to integrate GenAI across varying service lines and business operations.

Despite undergoing challenges in the healthcare and life sciences sectors, as well as temporary pressures in manufacturing, TCS remains optimistic about demand sustainability.

Trent

Trent, a constituent of the Tata Group, is a significant participant in the retail sector.

In 1998, the Tata Group acquired Littlewoods, a retail chain based in London, later rebranding it as Westside under the Trent name. The company manages 61 Westside department stores, multiple Star Bazaar hypermarkets, and Landmark bookstores, alongside outlets of the Spanish brand Zara.

As part of its retail growth strategy, Trent aims to expand Westside to 100 stores in the next four years and increase the count of Star Bazaar locations to 50 in the ensuing years. This initiative is anticipated to enhance scale and profitability, establishing Westside as one of India’s largest and swiftly growing retail chains.

In the second quarter of FY25, the company’s operational revenue increased to ₹41.5 billion, showcasing a 39.4% increase compared to ₹29.3 billion reported in the same quarter of the previous year.

The operating profit for the period was ₹6.4 billion, while the operating margin stayed constant at 15%.

Trent declared a consolidated net profit of ₹3.3 billion for Q2FY25, a 46.9% year-over-year increase, with the net profit margin registered at 8.6% against 7.6% in Q2FY24.

Below is the table illustrating the annual financial performance of the corporation.

The RoE and RoCE for this company are recorded at 36% and 24%, respectively, in FY24. Throughout the previous three years, the RoE and RoCE were 15% and 14.8%, respectively.

Trent’s upcoming strategy is centered on sustained growth and extending its market penetration. The corporation plans to continuously add 30 to 40 new stores every year, each meticulously chosen based on market prospects and site suitability. These outlets will adhere to high standards to create a significant influence in local communities.

Trent’s robust performance in tier 2 and tier 3 cities indicates that its allure is expanding beyond merely major urban centers, and the company will proceed to seek opportunities within these areas.

In the future, Trent’s strategy includes a vigorous push for a unified approach, merging its physical store growth with an expanding online footprint.

Conclusion

Investing in equities with consistently elevated returns on capital, such as robust ROE and ROCE, can be a prudent decision for individuals seeking long-term investments. 

These metrics signify a company’s capability to generate lucrative returns, yet high returns frequently draw competition, which can diminish profits over time.

For this reason, it is crucial not to depend solely on financial metrics. A winning investment strategy takes into account aspects like management excellence, growth capabilities, industry prospects, and corporate governance. 

Stay aware and consider the challenges ahead before making decisions.

Happy Investing!

Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be perceived as such.

This article is syndicated from Equitymaster.com