The 22% Return On Capital At CyberTech Systems and Software (NSE:CYBERTECH) Got Our Attention

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of CyberTech Systems and Software (NSE:CYBERTECH) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for CyberTech Systems and Software:

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

0.22 = ₹240m ÷ (₹1.5b - ₹397m) (Based on the trailing twelve months to September 2020).

So, CyberTech Systems and Software has an ROCE of 22%. In absolute terms that's a great return and it's even better than the IT industry average of 11%.

See our latest analysis for CyberTech Systems and Software

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 want to delve into the historical earnings, revenue and cash flow of CyberTech Systems and Software, check out these free graphs here.

What Can We Tell From CyberTech Systems and Software's ROCE Trend?

Investors would be pleased with what's happening at CyberTech Systems and Software. Over the last five years, returns on capital employed have risen substantially to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 50% more capital is being employed now too. So we're very much inspired by what we're seeing at CyberTech Systems and Software thanks to its ability to profitably reinvest capital.

Our Take On CyberTech Systems and Software's ROCE

To sum it up, CyberTech Systems and Software has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 209% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 4 warning signs facing CyberTech Systems and Software that you might find interesting.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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This article by Simply Wall St is general in nature. 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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