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Valhi (NYSE:VHI) Shareholders Will Want The ROCE Trajectory To Continue

Simply Wall St · 4d ago

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Valhi (NYSE:VHI) and its trend of ROCE, we really liked what we saw.

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Understanding 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. The formula for this calculation on Valhi is:

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

0.064 = US$150m ÷ (US$2.7b - US$369m) (Based on the trailing twelve months to September 2025).

Therefore, Valhi has an ROCE of 6.4%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 9.3%.

View our latest analysis for Valhi

roce
NYSE:VHI Return on Capital Employed January 7th 2026

Historical performance is a great place to start when researching a stock so above you can see the gauge for Valhi'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 Valhi.

How Are Returns Trending?

Valhi is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 56% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On Valhi's ROCE

As discussed above, Valhi appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Given the stock has declined 18% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about Valhi, we've spotted 3 warning signs, and 1 of them shouldn't be ignored.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.