The Return Trends At SigmaRoc (LON:SRC) Look Promising

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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, SigmaRoc (LON:SRC) looks quite promising in regards to its trends of return on capital.

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What Is 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. To calculate this metric for SigmaRoc, this is the formula:

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

0.057 = UK£104m ÷ (UK£2.2b - UK£401m) (Based on the trailing twelve months to June 2025).

Thus, SigmaRoc has an ROCE of 5.7%. On its own, that's a low figure but it's around the 6.8% average generated by the Basic Materials industry.

Check out our latest analysis for SigmaRoc

In the above chart we have measured SigmaRoc'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 SigmaRoc .

The Trend Of ROCE

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 5.7%. 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 925%. So we're very much inspired by what we're seeing at SigmaRoc thanks to its ability to profitably reinvest capital.

The Bottom Line On SigmaRoc's 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 SigmaRoc has. Since the stock has returned a staggering 104% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

SigmaRoc does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is a bit concerning...

While SigmaRoc may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.