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We Like These Underlying Return On Capital Trends At Cemtrex (NASDAQ:CETX)
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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. So on that note, Cemtrex (NASDAQ:CETX) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Cemtrex:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.084 = US$1.9m ÷ (US$47m - US$24m) (Based on the trailing twelve months to June 2025).
Therefore, Cemtrex has an ROCE of 8.4%. On its own, that's a low figure but it's around the 11% average generated by the Electronic industry.
Check out our latest analysis for Cemtrex
Historical performance is a great place to start when researching a stock so above you can see the gauge for Cemtrex's ROCE against it's prior returns. If you'd like to look at how Cemtrex has performed in the past in other metrics, you can view this free graph of Cemtrex's past earnings, revenue and cash flow.
How Are Returns Trending?
It's great to see that Cemtrex has started to generate some pre-tax earnings from prior investments. While the business is profitable now, it used to be incurring losses on invested capital five years ago. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 54%. Cemtrex could be selling under-performing assets since the ROCE is improving.
For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 52% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.
The Key Takeaway
In the end, Cemtrex has proven it's capital allocation skills are good with those higher returns from less amount of capital. However the stock is down a substantial 100% in the last five years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.
Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for Cemtrex (of which 3 can't be ignored!) that you should know about.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
About NasdaqCM:CETX
Cemtrex
Operates as a technology company in the United States and internationally.
Excellent balance sheet with moderate risk.
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