Returns Are Gaining Momentum At ACI Worldwide (NASDAQ:ACIW)

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at ACI Worldwide (NASDAQ:ACIW) and its trend of ROCE, we really liked what we saw.

Understanding 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. The formula for this calculation on ACI Worldwide is:

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

0.13 = US$311m ÷ (US$3.4b - US$1.0b) (Based on the trailing twelve months to June 2024).

Therefore, ACI Worldwide has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 9.2% generated by the Software industry.

Check out our latest analysis for ACI Worldwide

In the above chart we have measured ACI Worldwide's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for ACI Worldwide .

How Are Returns Trending?

ACI Worldwide is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 171% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On ACI Worldwide's ROCE

To sum it up, ACI Worldwide is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 76% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if ACI Worldwide can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for ACI Worldwide that we think you should be aware of.

While ACI Worldwide may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.