secunet Security Networks (ETR:YSN) Is Investing Its Capital With Increasing Efficiency

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in secunet Security Networks' (ETR:YSN) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on secunet Security Networks is:

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

0.33 = €52m ÷ (€240m - €82m) (Based on the trailing twelve months to December 2020).

So, secunet Security Networks has an ROCE of 33%. That's a fantastic return and not only that, it outpaces the average of 11% earned by companies in a similar industry.

Check out 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is secunet Security Networks' ROCE Trending?

Investors would be pleased with what's happening at secunet Security Networks. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 33%. Basically the business is earning more per dollar of capital invested and in addition to that, 245% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From secunet Security Networks' ROCE

All in all, it's terrific to see that secunet Security Networks is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 1,537% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

secunet Security Networks does have some risks though, and we've spotted 1 warning sign for secunet Security Networks that you might be interested in.

secunet Security Networks is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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