Investors Met With Slowing Returns on Capital At System Integrator (TSE:3826)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at System Integrator (TSE:3826) and its ROCE trend, we weren't exactly thrilled.

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Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for System Integrator, this is the formula:

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

0.10 = JP¥447m ÷ (JP¥5.5b - JP¥1.3b) (Based on the trailing twelve months to August 2025).

Thus, System Integrator has an ROCE of 10%. In isolation, that's a pretty standard return but against the Software industry average of 18%, it's not as good.

See our latest analysis for System Integrator

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 , check out these free graphs detailing revenue and cash flow performance of System Integrator.

So How Is System Integrator's ROCE Trending?

There hasn't been much to report for System Integrator's returns and its level of capital employed because both metrics have been steady for the past . This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at System Integrator in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

What We Can Learn From System Integrator's ROCE

In a nutshell, System Integrator has been trudging along with the same returns from the same amount of capital over the last . And investors appear hesitant that the trends will pick up because the stock has fallen 14% in the last five years. Therefore based on the analysis done in this article, we don't think System Integrator has the makings of a multi-bagger.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for System Integrator (of which 1 shouldn't be ignored!) that you should know about.

While System Integrator 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.