Investors Met With Slowing Returns on Capital At Vishnu Chemicals (NSE:VISHNU)

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. 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 ran our eye over Vishnu Chemicals' (NSE:VISHNU) trend of ROCE, we liked what we saw.

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Understanding 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 Vishnu Chemicals:

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

0.15 = ₹2.0b ÷ (₹18b - ₹5.2b) (Based on the trailing twelve months to September 2025).

So, Vishnu Chemicals has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 12% it's much better.

See our latest analysis for Vishnu Chemicals

Above you can see how the current ROCE for Vishnu Chemicals 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 analyst report for Vishnu Chemicals .

What Can We Tell From Vishnu Chemicals' ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 220% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Vishnu Chemicals 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.

On a side note, Vishnu Chemicals has done well to reduce current liabilities to 29% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

What We Can Learn From Vishnu Chemicals' ROCE

The main thing to remember is that Vishnu Chemicals has proven its ability to continually reinvest at respectable rates of return. On top of that, the stock has rewarded shareholders with a remarkable 1,404% return to those who've held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you're still interested in Vishnu Chemicals it's worth checking out our FREE intrinsic value approximation for VISHNU to see if it's trading at an attractive price in other respects.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.