Vaibhav Global (NSE:VAIBHAVGBL) Has Some Way To Go To Become A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. So, when we ran our eye over Vaibhav Global's (NSE:VAIBHAVGBL) trend of ROCE, we liked what we saw.

What Is 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. Analysts use this formula to calculate it for Vaibhav Global:

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

0.15 = ₹1.8b ÷ (₹17b - ₹5.0b) (Based on the trailing twelve months to June 2022).

So, Vaibhav Global has an ROCE of 15%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Luxury industry average of 14%.

Check out our latest analysis for Vaibhav Global

Above you can see how the current ROCE for Vaibhav Global compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Vaibhav Global.

What Can We Tell From Vaibhav Global's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 170% more capital in the last five years, and the returns on that capital have remained stable at 15%. 15% is a pretty standard return, and it provides some comfort knowing that Vaibhav Global 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.

Our Take On Vaibhav Global's ROCE

To sum it up, Vaibhav Global has simply been reinvesting capital steadily, at those decent rates of return. On top of that, the stock has rewarded shareholders with a remarkable 238% return to those who've held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

On a final note, we've found 2 warning signs for Vaibhav Global that we think you should be aware of.

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.