Returns At EPAM Systems (NYSE:EPAM) Appear To Be Weighed Down

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. With that in mind, the ROCE of EPAM Systems (NYSE:EPAM) looks decent, right now, so lets see what the trend of returns can tell us.

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. The formula for this calculation on EPAM Systems is:

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

0.15 = US$574m ÷ (US$4.5b - US$681m) (Based on the trailing twelve months to September 2024).

So, EPAM Systems has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 11% generated by the IT industry.

View our latest analysis for EPAM Systems

In the above chart we have measured EPAM Systems' 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 EPAM Systems .

So How Is EPAM Systems' ROCE Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 118% more capital in the last five years, and the returns on that capital have remained stable at 15%. 15% is a pretty standard return, and it provides some comfort knowing that EPAM Systems has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line On EPAM Systems' ROCE

In the end, EPAM Systems has proven its ability to adequately reinvest capital at good rates of return. And given the stock has only risen 7.9% over the last five years, we'd suspect the market is beginning to recognize these trends. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

EPAM Systems could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for EPAM on our platform quite valuable.

While EPAM Systems 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.