Why The 20% Return On Capital At Vesuvius India (NSE:VESUVIUS) Should Have Your Attention

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. With that in mind, the ROCE of Vesuvius India (NSE:VESUVIUS) looks great, so lets see what the trend can tell us.

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What Is Return On Capital Employed (ROCE)?

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 Vesuvius India is:

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

0.20 = ₹2.9b ÷ (₹18b - ₹3.8b) (Based on the trailing twelve months to March 2025).

Thus, Vesuvius India has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Machinery industry average of 16%.

View our latest analysis for Vesuvius India

In the above chart we have measured Vesuvius India's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Vesuvius India .

So How Is Vesuvius India's ROCE Trending?

We like the trends that we're seeing from Vesuvius India. The data shows that returns on capital have increased substantially over the last five years to 20%. The amount of capital employed has increased too, by 79%. So we're very much inspired by what we're seeing at Vesuvius India thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that Vesuvius India can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for VESUVIUS that compares the share price and estimated value.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.