Here's What To Make Of Vijaya Diagnostic Centre's (NSE:VIJAYA) Decelerating Rates Of Return

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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 Vijaya Diagnostic Centre's (NSE:VIJAYA) ROCE trend, we were pretty happy with what we saw.

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Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Vijaya Diagnostic Centre is:

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

0.18 = ₹2.0b ÷ (₹13b - ₹1.6b) (Based on the trailing twelve months to March 2025).

So, Vijaya Diagnostic Centre has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 11% generated by the Healthcare industry.

View our latest analysis for Vijaya Diagnostic Centre

In the above chart we have measured Vijaya Diagnostic Centre's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Vijaya Diagnostic Centre for free.

What Can We Tell From Vijaya Diagnostic Centre's ROCE Trend?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 18% and the business has deployed 162% more capital into its operations. 18% is a pretty standard return, and it provides some comfort knowing that Vijaya Diagnostic Centre 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.

The Bottom Line On Vijaya Diagnostic Centre's ROCE

The main thing to remember is that Vijaya Diagnostic Centre has proven its ability to continually reinvest at respectable rates of return. On top of that, the stock has rewarded shareholders with a remarkable 237% return to those who've held over the last three years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

While Vijaya Diagnostic Centre doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for VIJAYA on our platform.

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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.