Sure Global Tech (TADAWUL:9550) Looks To Prolong 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? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, the ROCE of Sure Global Tech (TADAWUL:9550) looks attractive right now, so lets see what the trend of returns can tell us.

What Is 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 Sure Global Tech is:

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

0.27 = ر.س31m ÷ (ر.س157m - ر.س40m) (Based on the trailing twelve months to June 2024).

Therefore, Sure Global Tech has an ROCE of 27%. In absolute terms that's a very respectable return and compared to the IT industry average of 29% it's pretty much on par.

Check out our latest analysis for Sure Global Tech

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Sure Global Tech.

What Does the ROCE Trend For Sure Global Tech Tell Us?

It's hard not to be impressed by Sure Global Tech's returns on capital. Over the past four years, ROCE has remained relatively flat at around 27% and the business has deployed 77% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Sure Global Tech can keep this up, we'd be very optimistic about its future.

On a side note, Sure Global Tech has done well to reduce current liabilities to 25% of total assets over the last four years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Key Takeaway

Sure Global Tech has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has followed suit returning a meaningful 82% to shareholders over the last year. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Sure Global Tech does have some risks, we noticed 2 warning signs (and 1 which can't be ignored) we think you should know about.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.