Slowing Rates Of Return At Syensqo (EBR:SYENS) Leave Little Room For Excitement

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Syensqo (EBR:SYENS) and its ROCE trend, we weren't exactly thrilled.

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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. The formula for this calculation on Syensqo is:

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

0.066 = €663m ÷ (€12b - €2.1b) (Based on the trailing twelve months to March 2025).

So, Syensqo has an ROCE of 6.6%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 9.0%.

See our latest analysis for Syensqo

In the above chart we have measured Syensqo'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 Syensqo .

What Does the ROCE Trend For Syensqo Tell Us?

There are better returns on capital out there than what we're seeing at Syensqo. Over the past four years, ROCE has remained relatively flat at around 6.6% and the business has deployed 48% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

One more thing to note, even though ROCE has remained relatively flat over the last four years, the reduction in current liabilities to 17% of total assets, is good to see from a business owner's perspective. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

What We Can Learn From Syensqo's ROCE

In summary, Syensqo has simply been reinvesting capital and generating the same low rate of return as before. Since the stock has declined 15% over the last year, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Syensqo has the makings of a multi-bagger.

While Syensqo doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for SYENS on our platform.

While Syensqo isn't earning the highest return, check out this free list of companies that are 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.