If we are to find a title that could multiply over the long term, what are the underlying trends that we need to look for? First, we will want to see a return on capital employed (ROCE) which increases and, on the other hand, a based capital employed. This shows us that it is a composing machine, capable of continually reinvesting its profits in the business and generating higher returns. So on that note, efficient (NASDAQ: PRFT) looks pretty promising when it comes to its return on capital trends.
What is Return on Employee Capital (ROCE)?
Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. The formula for this calculation on Perficient is:
Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)
0.11 = $ 75 million ÷ ($ 768 million – $ 104 million) (Based on the last twelve months up to March 2021).
Therefore, Perficient has a ROCE of 11%. This is a fairly standard return and it is in line with the industry average of 11%.
Check out our latest analysis for Perficient
Above you can see how Perficient’s current ROCE compares to its previous returns on capital, but there is little you can say about the past. If you want, you can check out the analysts’ forecasts covering Perficient here for free.
What is the trend for returns?
Perficient shows positive trends. Over the past five years, return on capital employed has increased substantially to 11%. The company actually makes more money per dollar of capital used, and it should be noted that the amount of capital has also increased, by 56%. So we’re very inspired by what we’re seeing at Perficient through its ability to reinvest capital profitably.
To sum up, Perficient has proven that it can reinvest in the business and generate higher returns on that capital employed, which is great. Given that the stock has returned 274% to shareholders over the past five years, it seems investors are recognizing these changes. Therefore, we think it would be worth your while to check if these trends will continue.
Perficient does come with certain risks, however, and we have spotted 4 warning signs for Perficient that might interest you.
While Perficient does not currently generate the highest returns, we have compiled a list of companies that currently generate over 25% return on equity. Check it out free list here.
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