• EN

    • -+ 0.00%
    -+ 0.00%
    -+ 0.00%

    There's Been No Shortage Of Growth Recently For Vimi Fasteners' (BIT:VIM) Returns On Capital

    Simply Wall St·04/08/2025 07:48:49
    Listen to the news

    What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Speaking of which, we noticed some great changes in Vimi Fasteners' (BIT:VIM) returns on capital, so let's have a look.

    AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

    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. Analysts use this formula to calculate it for Vimi Fasteners:

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

    0.066 = €3.1m ÷ (€79m - €33m) (Based on the trailing twelve months to June 2024).

    Therefore, Vimi Fasteners has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 8.9%.

    See our latest analysis for Vimi Fasteners

    roce
    BIT:VIM Return on Capital Employed April 8th 2025

    In the above chart we have measured Vimi Fasteners' 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 Vimi Fasteners for free.

    What Does the ROCE Trend For Vimi Fasteners Tell Us?

    We're delighted to see that Vimi Fasteners is reaping rewards from its investments and has now broken into profitability. The company now earns 6.6% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

    On a side note, Vimi Fasteners' current liabilities are still rather high at 41% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

    The Bottom Line On Vimi Fasteners' ROCE

    In summary, we're delighted to see that Vimi Fasteners has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 56% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

    Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Vimi Fasteners (of which 1 is a bit concerning!) that you should know about.

    While Vimi Fasteners isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.