Returns On Capital Are A Standout For Vaibhav Global (NSE:VAIBHAVGBL)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Vaibhav Global (NSE:VAIBHAVGBL) we really liked what we saw.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Vaibhav Global, this is the formula:

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

0.29 = ₹3.3b ÷ (₹16b - ₹5.1b) (Based on the trailing twelve months to September 2021).

So, Vaibhav Global has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 13% earned by companies in a similar industry.

See our latest analysis for Vaibhav Global

In the above chart we have measured Vaibhav Global's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Vaibhav Global.

The Trend Of ROCE

Investors would be pleased with what's happening at Vaibhav Global. Over the last five years, returns on capital employed have risen substantially to 29%. 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 193%. So we're very much inspired by what we're seeing at Vaibhav Global thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, Vaibhav Global has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 805% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Vaibhav Global can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Vaibhav Global, we've discovered 2 warning signs that you should be aware of.

Vaibhav Global 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.