The Return Trends At Silvair (WSE:SVRS) Look Promising

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 looked at Silvair (WSE:SVRS) and its trend of ROCE, we really liked what we saw.

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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. To calculate this metric for Silvair, this is the formula:

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

0.073 = US$855k ÷ (US$16m - US$4.0m) (Based on the trailing twelve months to June 2025).

So, Silvair has an ROCE of 7.3%. Ultimately, that's a low return and it under-performs the Software industry average of 15%.

View our latest analysis for Silvair

Historical performance is a great place to start when researching a stock so above you can see the gauge for Silvair's ROCE against it's prior returns. If you'd like to look at how Silvair has performed in the past in other metrics, you can view this free graph of Silvair's past earnings, revenue and cash flow.

What Does the ROCE Trend For Silvair Tell Us?

Silvair has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 7.3% which is a sight for sore eyes. Not only that, but the company is utilizing 79% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

On a related note, the company's ratio of current liabilities to total assets has decreased to 25%, which basically reduces it's funding from the likes of short-term creditors or suppliers. This tells us that Silvair has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.

In Conclusion...

Long story short, we're delighted to see that Silvair's reinvestment activities have paid off and the company is now profitable. Astute investors may have an opportunity here because the stock has declined 13% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you want to know some of the risks facing Silvair we've found 3 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.

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.