Returns On Capital At BIPROGY (TSE:8056) Have Stalled

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. 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 ran our eye over BIPROGY's (TSE:8056) trend of ROCE, we liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from 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)

0.17 = JP¥35b ÷ (JP¥297b - JP¥97b) (Based on the trailing twelve months to June 2024).

So, BIPROGY has an ROCE of 17%. In absolute terms, that's a pretty normal return, and it's somewhat close to the IT industry average of 15%.

View 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'd like, you can check out the forecasts from the analysts covering BIPROGY for free.

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 17% and the business has deployed 50% more capital into its operations. 17% is a pretty standard return, and it provides some comfort knowing that BIPROGY has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

What We Can Learn From BIPROGY's ROCE

The main thing to remember is that BIPROGY has proven its ability to continually reinvest at respectable rates of return. And the stock has followed suit returning a meaningful 55% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

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

While BIPROGY isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.