Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at VTEX (NYSE:VTEX) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
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 VTEX:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.045 = US$12m ÷ (US$356m - US$81m) (Based on the trailing twelve months to March 2025).
Therefore, VTEX has an ROCE of 4.5%. Even though it's in line with the industry average of 5.4%, it's still a low return by itself.
View our latest analysis for VTEX
In the above chart we have measured VTEX's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for VTEX .
What Does the ROCE Trend For VTEX Tell Us?
Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 4.5%. Basically the business is earning more per dollar of capital invested and in addition to that, 268% more capital is being employed now too. So we're very much inspired by what we're seeing at VTEX thanks to its ability to profitably reinvest capital.
The Key Takeaway
All in all, it's terrific to see that VTEX is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if VTEX can keep these trends up, it could have a bright future ahead.
On a separate note, we've found 1 warning sign for VTEX you'll probably want to know about.
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.