We Like These Underlying Return On Capital Trends At Sapiens International (NASDAQ:SPNS)

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Sapiens International (NASDAQ:SPNS) and its trend of ROCE, we really liked what we saw.

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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 Sapiens International is:

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

0.17 = US$87m ÷ (US$714m - US$195m) (Based on the trailing twelve months to March 2025).

So, Sapiens International has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Software industry average of 9.6% it's much better.

Check out our latest analysis for Sapiens International

In the above chart we have measured Sapiens International's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Sapiens International .

So How Is Sapiens International's ROCE Trending?

The trends we've noticed at Sapiens International are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 17%. The amount of capital employed has increased too, by 53%. So we're very much inspired by what we're seeing at Sapiens International thanks to its ability to profitably reinvest capital.

The Key Takeaway

In summary, it's great to see that Sapiens International can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. With that in mind, we believe the promising trends warrant this stock for further investigation.

While Sapiens International looks impressive, no company is worth an infinite price. The intrinsic value infographic for SPNS helps visualize whether it is currently trading for a fair price.

While Sapiens International 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.