Under The Bonnet, Azeus Systems Holdings' (SGX:BBW) Returns Look Impressive

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Azeus Systems Holdings (SGX:BBW) looks great, so lets see what the trend 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. To calculate this metric for Azeus Systems Holdings, this is the formula:

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

0.29 = HK$59m ÷ (HK$304m - HK$102m) (Based on the trailing twelve months to September 2023).

So, Azeus Systems Holdings has an ROCE of 29%. In absolute terms that's a great return and it's even better than the IT industry average of 13%.

View our latest analysis for Azeus Systems Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Azeus Systems Holdings' ROCE against it's prior returns. If you'd like to look at how Azeus Systems Holdings has performed in the past in other metrics, you can view this free graph of Azeus Systems Holdings' past earnings, revenue and cash flow.

What Does the ROCE Trend For Azeus Systems Holdings Tell Us?

The trends we've noticed at Azeus Systems Holdings are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 29%. Basically the business is earning more per dollar of capital invested and in addition to that, 116% more capital is being employed now too. So we're very much inspired by what we're seeing at Azeus Systems Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line On Azeus Systems Holdings' ROCE

All in all, it's terrific to see that Azeus Systems Holdings is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Azeus Systems Holdings can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 2 warning signs facing Azeus Systems Holdings that you might find interesting.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.