The Returns At Global Security Experts (TSE:4417) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Global Security Experts (TSE:4417), they do have a high ROCE, but we weren't exactly elated from how returns are trending.

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

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 Global Security Experts:

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

0.36 = JP¥1.6b ÷ (JP¥8.1b - JP¥3.6b) (Based on the trailing twelve months to March 2025).

Thus, Global Security Experts has an ROCE of 36%. That's a fantastic return and not only that, it outpaces the average of 16% earned by companies in a similar industry.

View our latest analysis for Global Security Experts

In the above chart we have measured Global Security Experts' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Global Security Experts .

How Are Returns Trending?

Things have been pretty stable at Global Security Experts, with its capital employed and returns on that capital staying somewhat the same for the last . This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So it may not be a multi-bagger in the making, but given the decent 36% return on capital, it'd be difficult to find fault with the business's current operations.

Another thing to note, Global Security Experts has a high ratio of current liabilities to total assets of 45%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

What We Can Learn From Global Security Experts' ROCE

In summary, Global Security Experts isn't compounding its earnings but is generating decent returns on the same amount of capital employed. Yet to long term shareholders the stock has gifted them an incredible 207% return in the last three years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a final note, we've found 2 warning signs for Global Security Experts that we think you should be aware of.

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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.