Oracle Financial Services Software (NSE:OFSS) Is Aiming To Keep Up Its Impressive Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Oracle Financial Services Software's (NSE:OFSS) trend of ROCE, we really liked what we saw.

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. Analysts use this formula to calculate it for Oracle Financial Services Software:

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

0.35 = ₹24b ÷ (₹79b - ₹11b) (Based on the trailing twelve months to June 2023).

Thus, Oracle Financial Services Software has an ROCE of 35%. In absolute terms that's a great return and it's even better than the Software industry average of 12%.

See our latest analysis for Oracle Financial Services Software

Above you can see how the current ROCE for Oracle Financial Services Software 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.

How Are Returns Trending?

Oracle Financial Services Software deserves to be commended in regards to it's returns. The company has consistently earned 35% for the last five years, and the capital employed within the business has risen 27% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Oracle Financial Services Software can keep this up, we'd be very optimistic about its future.

Our Take On Oracle Financial Services Software's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. In light of this, the stock has only gained 26% over the last five years for shareholders who have owned the stock in this period. So to determine if Oracle Financial Services Software is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

If you want to continue researching Oracle Financial Services Software, you might be interested to know about the 1 warning sign that our analysis has discovered.

Oracle Financial Services Software 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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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.