Sirma Group Holding AD (BUL:SGH) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. So when we looked at Sirma Group Holding AD (BUL:SGH) and its trend of ROCE, we really liked what we saw.

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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. Analysts use this formula to calculate it for Sirma Group Holding AD:

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

0.064 = лв6.1m ÷ (лв116m - лв21m) (Based on the trailing twelve months to September 2025).

Therefore, Sirma Group Holding AD has an ROCE of 6.4%. Ultimately, that's a low return and it under-performs the IT industry average of 13%.

View our latest analysis for Sirma Group Holding AD

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

What The Trend Of ROCE Can Tell Us

You'd find it hard not to be impressed with the ROCE trend at Sirma Group Holding AD. We found that the returns on capital employed over the last five years have risen by 51%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Speaking of capital employed, the company is actually utilizing 20% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

Our Take On Sirma Group Holding AD's ROCE

In summary, it's great to see that Sirma Group Holding AD has been able to turn things around and earn higher returns on lower amounts of capital. And a remarkable 106% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Sirma Group Holding AD we've found 4 warning signs (2 shouldn't be ignored!) that you should be aware of before investing here.

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.