Investors Shouldn't Overlook secunet Security Networks' (ETR:YSN) Impressive Returns On Capital

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of secunet Security Networks (ETR:YSN) looks great, so lets see what the trend can tell us.

Return On Capital Employed (ROCE): What is it?

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. To calculate this metric for secunet Security Networks, this is the formula:

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

0.38 = €60m ÷ (€239m - €84m) (Based on the trailing twelve months to June 2021).

Thus, secunet Security Networks has an ROCE of 38%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

View our latest analysis for secunet Security Networks

Above you can see how the current ROCE for secunet Security Networks compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for secunet Security Networks.

What The Trend Of ROCE Can Tell Us

secunet Security Networks is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 38%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 240%. So we're very much inspired by what we're seeing at secunet Security Networks thanks to its ability to profitably reinvest capital.

The Bottom Line On secunet Security Networks' ROCE

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 secunet Security Networks has. And a remarkable 1,312% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if secunet Security Networks can keep these trends up, it could have a bright future ahead.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

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.

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.

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