The Return Trends At Vision Infra Equipment Solutions (NSE:VIESL) Look Promising

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Vision Infra Equipment Solutions (NSE:VIESL) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Vision Infra Equipment Solutions, this is the formula:

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

0.18 = ₹640m ÷ (₹5.2b - ₹1.7b) (Based on the trailing twelve months to March 2025).

Therefore, Vision Infra Equipment Solutions has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Trade Distributors industry average of 6.9% it's much better.

View our latest analysis for Vision Infra Equipment Solutions

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'd like to look at how Vision Infra Equipment Solutions has performed in the past in other metrics, you can view this free graph of Vision Infra Equipment Solutions' past earnings, revenue and cash flow.

How Are Returns Trending?

We like the trends that we're seeing from Vision Infra Equipment Solutions. Over the last four years, returns on capital employed have risen substantially to 18%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 363%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, Vision Infra Equipment Solutions has decreased current liabilities to 33% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. Therefore we can rest assured that the growth in ROCE is a result of the business' fundamental improvements, rather than a cooking class featuring this company's books.

The Bottom Line On Vision Infra Equipment Solutions' ROCE

To sum it up, Vision Infra Equipment Solutions has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 9.4% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Vision Infra Equipment Solutions can keep these trends up, it could have a bright future ahead.

One final note, you should learn about the 3 warning signs we've spotted with Vision Infra Equipment Solutions (including 2 which are significant) .

While Vision Infra Equipment Solutions isn't earning the highest return, check out this free list of companies that are 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.