V-MARC India (NSE:VMARCIND) Is Aiming To Keep Up Its Impressive Returns

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at V-MARC India (NSE:VMARCIND), we liked what we saw.

What Is Return On Capital Employed (ROCE)?

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 V-MARC India:

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

0.34 = ₹578m ÷ (₹4.5b - ₹2.9b) (Based on the trailing twelve months to March 2024).

Thus, V-MARC India has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

View our latest analysis for V-MARC India

Historical performance is a great place to start when researching a stock so above you can see the gauge for V-MARC India's ROCE against it's prior returns. If you'd like to look at how V-MARC India has performed in the past in other metrics, you can view this free graph of V-MARC India's past earnings, revenue and cash flow.

How Are Returns Trending?

We'd be pretty happy with returns on capital like V-MARC India. The company has consistently earned 34% for the last five years, and the capital employed within the business has risen 407% in that time. Now considering ROCE is an attractive 34%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If V-MARC India can keep this up, we'd be very optimistic about its future.

Another thing to note, V-MARC India has a high ratio of current liabilities to total assets of 63%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

What We Can Learn From V-MARC India's ROCE

In short, we'd argue V-MARC India has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And the stock has done incredibly well with a 508% return over the last three years, so long term investors are no doubt ecstatic with that result. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

If you'd like to know more about V-MARC India, we've spotted 4 warning signs, and 2 of them are significant.

V-MARC India is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com