Yahoo Finance Returns On Capital At Secura Group (Catalist:43B) Have Stalled
What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating Secura Group (Catalist:43B), we don't think it's current trends fit the mold of a multi-bagger.
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. To calculate this metric for Secura Group, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.034 = S$1.7m ÷ (S$59m - S$11m) (Based on the trailing twelve months to December 2023).
Thus, Secura Group has an ROCE of 3.4%. Ultimately, that's a low return and it under-performs the Commercial Services industry average of 8.6%.
View our latest analysis for Secura Group
Historical performance is a great place to start when researching a stock so above you can see the gauge for Secura Group's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Secura Group.
How Are Returns Trending?
There hasn't been much to report for Secura Group's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if Secura Group doesn't end up being a multi-bagger in a few years time.
Our Take On Secura Group's ROCE
In a nutshell, Secura Group has been trudging along with the same returns from the same amount of capital over the last five years. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. Therefore based on the analysis done in this article, we don't think Secura Group has the makings of a multi-bagger.
Like most companies, Secura Group does come with some risks, and we've found 4 warning signs that you should be aware of.
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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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
