Sygnity (WSE:SGN) Is Aiming To Keep Up Its Impressive Returns

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So, when we ran our eye over Sygnity's (WSE:SGN) trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Sygnity:

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

0.25 = zł83m ÷ (zł427m - zł98m) (Based on the trailing twelve months to June 2025).

So, Sygnity has an ROCE of 25%. In absolute terms that's a great return and it's even better than the IT industry average of 15%.

See our latest analysis for Sygnity

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're interested in investigating Sygnity's past further, check out this free graph covering Sygnity's past earnings, revenue and cash flow.

What Can We Tell From Sygnity's ROCE Trend?

Sygnity deserves to be commended in regards to it's returns. The company has consistently earned 25% for the last five years, and the capital employed within the business has risen 75% in that time. Now considering ROCE is an attractive 25%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Sygnity can keep this up, we'd be very optimistic about its future.

On a side note, Sygnity has done well to reduce current liabilities to 23% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

In Conclusion...

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. On top of that, the stock has rewarded shareholders with a remarkable 1,125% return to those who've held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for SGN on our platform that is definitely worth checking out.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.