Why We Like The Returns At Vinyas Innovative Technologies (NSE:VINYAS)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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 Vinyas Innovative Technologies (NSE:VINYAS) we really liked what we saw.

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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. Analysts use this formula to calculate it for Vinyas Innovative Technologies:

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

0.23 = ₹330m ÷ (₹2.9b - ₹1.4b) (Based on the trailing twelve months to September 2024).

Therefore, Vinyas Innovative Technologies has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 14% earned by companies in a similar industry.

See our latest analysis for Vinyas Innovative Technologies

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Vinyas Innovative Technologies' past further, check out this free graph covering Vinyas Innovative Technologies' past earnings, revenue and cash flow.

So How Is Vinyas Innovative Technologies' ROCE Trending?

Vinyas Innovative Technologies is displaying some positive trends. The data shows that returns on capital have increased substantially over the last three years to 23%. Basically the business is earning more per dollar of capital invested and in addition to that, 198% more capital is being employed now too. So we're very much inspired by what we're seeing at Vinyas Innovative Technologies thanks to its ability to profitably reinvest capital.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 50%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance. Nevertheless, there are some potential risks the company is bearing with current liabilities that high, so just keep that in mind.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Vinyas Innovative Technologies has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 30% return over the last year. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 2 warning signs for Vinyas Innovative Technologies you'll probably want to know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.