We Think Vishnusurya Projects and Infra (NSE:VISHNUINFR) Might Have The DNA Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to 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. Speaking of which, we noticed some great changes in Vishnusurya Projects and Infra's (NSE:VISHNUINFR) returns on capital, so let's have a look.

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Understanding 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. To calculate this metric for Vishnusurya Projects and Infra, this is the formula:

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

0.24 = ₹397m ÷ (₹2.4b - ₹728m) (Based on the trailing twelve months to September 2024).

So, Vishnusurya Projects and Infra has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 6.6% earned by companies in a similar industry.

See our latest analysis for Vishnusurya Projects and Infra

Historical performance is a great place to start when researching a stock so above you can see the gauge for Vishnusurya Projects and Infra's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Vishnusurya Projects and Infra.

What Can We Tell From Vishnusurya Projects and Infra's ROCE Trend?

Vishnusurya Projects and Infra is displaying some positive trends. The data shows that returns on capital have increased substantially over the last three years to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 183% more capital is being employed now too. So we're very much inspired by what we're seeing at Vishnusurya Projects and Infra thanks to its ability to profitably reinvest capital.

One more thing to note, Vishnusurya Projects and Infra has decreased current liabilities to 30% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

Our Take On Vishnusurya Projects and Infra's ROCE

In summary, it's great to see that Vishnusurya Projects and Infra can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Astute investors may have an opportunity here because the stock has declined 13% in the last year. So researching this company further and determining whether or not these trends will continue seems justified.

Vishnusurya Projects and Infra does have some risks, we noticed 3 warning signs (and 1 which is significant) we think you should know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.