Returns On Capital At Veto Switchgears and Cables (NSE:VETO) Have Stalled

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Veto Switchgears and Cables' (NSE:VETO) ROCE trend, we were pretty happy with what we saw.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Veto Switchgears and Cables:

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

0.10 = ₹286m ÷ (₹3.3b - ₹584m) (Based on the trailing twelve months to March 2025).

So, Veto Switchgears and Cables has an ROCE of 10%. In isolation, that's a pretty standard return but against the Electrical industry average of 18%, it's not as good.

Check out our latest analysis for Veto Switchgears and Cables

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Veto Switchgears and Cables' past further, check out this free graph covering Veto Switchgears and Cables' past earnings, revenue and cash flow.

What Does the ROCE Trend For Veto Switchgears and Cables Tell Us?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 53% more capital into its operations. 10% is a pretty standard return, and it provides some comfort knowing that Veto Switchgears and Cables has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

In Conclusion...

In the end, Veto Switchgears and Cables has proven its ability to adequately reinvest capital at good rates of return. On top of that, the stock has rewarded shareholders with a remarkable 141% return to those who've held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Veto Switchgears and Cables does have some risks though, and we've spotted 3 warning signs for Veto Switchgears and Cables that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.