Slowing Rates Of Return At CSG Systems International (NASDAQ:CSGS) Leave Little Room For Excitement

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Although, when we looked at CSG Systems International (NASDAQ:CSGS), it didn't seem to tick all of these boxes.

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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 CSG Systems International, this is the formula:

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

0.17 = US$156m ÷ (US$1.4b - US$516m) (Based on the trailing twelve months to June 2025).

Thus, CSG Systems International has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Professional Services industry average of 14% it's much better.

Check out our latest analysis for CSG Systems International

Above you can see how the current ROCE for CSG Systems International compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for CSG Systems International .

How Are Returns Trending?

Things have been pretty stable at CSG Systems International, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if CSG Systems International doesn't end up being a multi-bagger in a few years time.

The Key Takeaway

In a nutshell, CSG Systems International has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has gained an impressive 65% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching CSG Systems International, you might be interested to know about the 1 warning sign that our analysis has discovered.

While CSG Systems International 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.