Perficient (NASDAQ:PRFT) Is Looking To Continue Growing Its Returns On Capital

Simply Wall St
·2 min read

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Speaking of which, we noticed some great changes in Perficient's (NASDAQ:PRFT) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Perficient is:

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

0.15 = US$123m ÷ (US$903m - US$95m) (Based on the trailing twelve months to March 2022).

Therefore, Perficient has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the IT industry average of 12% it's much better.

See our latest analysis for Perficient

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In the above chart we have measured Perficient's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Perficient.

What Does the ROCE Trend For Perficient Tell Us?

Investors would be pleased with what's happening at Perficient. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The amount of capital employed has increased too, by 93%. So we're very much inspired by what we're seeing at Perficient thanks to its ability to profitably reinvest capital.

What We Can Learn From Perficient's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Perficient has. 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 Perficient can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Perficient, we've discovered 3 warning signs that you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.