Returns At Hyrican Informationssysteme (FRA:HYI) Are On The Way Up

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Hyrican Informationssysteme (FRA:HYI) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Hyrican Informationssysteme:

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

0.097 = €2.8m ÷ (€35m - €6.2m) (Based on the trailing twelve months to December 2021).

Thus, Hyrican Informationssysteme has an ROCE of 9.7%. In absolute terms, that's a low return but it's around the Tech industry average of 9.2%.

See our latest analysis for Hyrican Informationssysteme

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Hyrican Informationssysteme has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Hyrican Informationssysteme's ROCE Trending?

Hyrican Informationssysteme has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 501% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

What We Can Learn From Hyrican Informationssysteme's ROCE

In summary, we're delighted to see that Hyrican Informationssysteme has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 13% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

One more thing, we've spotted 3 warning signs facing Hyrican Informationssysteme that you might find interesting.

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.

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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.