Returns On Capital Are Showing Encouraging Signs At BIPROGY (TSE:8056)

What trends should we look for it we want to identify stocks that can 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. Speaking of which, we noticed some great changes in BIPROGY's (TSE:8056) returns on capital, so let's have a look.

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. The formula for this calculation on BIPROGY is:

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

0.18 = JP¥34b ÷ (JP¥283b - JP¥91b) (Based on the trailing twelve months to December 2023).

Thus, BIPROGY has an ROCE of 18%. In absolute terms, that's a pretty normal return, and it's somewhat close to the IT industry average of 16%.

Check out our latest analysis for BIPROGY

In the above chart we have measured BIPROGY's 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 BIPROGY .

The Trend Of ROCE

Investors would be pleased with what's happening at BIPROGY. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. The amount of capital employed has increased too, by 47%. So we're very much inspired by what we're seeing at BIPROGY thanks to its ability to profitably reinvest capital.

Our Take On BIPROGY'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 BIPROGY has. Since the stock has returned a solid 84% to shareholders over the last five years, it's fair to say investors are beginning to recognize 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.

Like most companies, BIPROGY does come with some risks, and we've found 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.