Sikri Holding (OB:SIKRI) Has Some Way To Go To Become A Multi-Bagger

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Sikri Holding (OB:SIKRI) and its ROCE trend, we weren't exactly thrilled.

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. To calculate this metric for Sikri Holding, this is the formula:

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

0.015 = kr20m ÷ (kr1.7b - kr319m) (Based on the trailing twelve months to September 2021).

Thus, Sikri Holding has an ROCE of 1.5%. Ultimately, that's a low return and it under-performs the Software industry average of 7.7%.

View our latest analysis for Sikri Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sikri Holding's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Sikri Holding, check out these free graphs here.

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for Sikri Holding's returns and its level of capital employed because both metrics have been steady for the past . It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Sikri Holding to be a multi-bagger going forward.

The Key Takeaway

We can conclude that in regards to Sikri Holding's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 13% over the last year, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know more about Sikri Holding, we've spotted 5 warning signs, and 1 of them is concerning.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.