Return Trends At Concurrent Technologies (LON:CNC) Aren't Appealing
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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Concurrent Technologies' (LON:CNC) ROCE trend, we were pretty happy with what we saw.
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 Concurrent Technologies:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = UK£4.3m ÷ (UK£31m - UK£6.0m) (Based on the trailing twelve months to June 2021).
Thus, Concurrent Technologies has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Tech industry average of 8.6% it's much better.
Check out our latest analysis for Concurrent Technologies
Historical performance is a great place to start when researching a stock so above you can see the gauge for Concurrent Technologies' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Concurrent Technologies, check out these free graphs here.
The Trend Of ROCE
While the returns on capital are good, they haven't moved much. The company has employed 40% more capital in the last five years, and the returns on that capital have remained stable at 17%. 17% is a pretty standard return, and it provides some comfort knowing that Concurrent Technologies has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
Our Take On Concurrent Technologies' ROCE
In the end, Concurrent Technologies has proven its ability to adequately reinvest capital at good rates of return. Therefore it's no surprise that shareholders have earned a respectable 40% return if they held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.
If you'd like to know about the risks facing Concurrent Technologies, we've discovered 3 warning signs that you should be aware of.
While Concurrent Technologies 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.
