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When we're researching a company, it's sometimes hard to find the warning signs, but there are some financial metrics that can help spot trouble early. More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. On that note, looking into TruBridge (NASDAQ:TBRG), we weren't too upbeat about how things were going.
What Is 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. The formula for this calculation on TruBridge is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0092 = US$3.2m ÷ (US$394m - US$53m) (Based on the trailing twelve months to December 2024).
So, TruBridge has an ROCE of 0.9%. Ultimately, that's a low return and it under-performs the Healthcare Services industry average of 6.8%.
See our latest analysis for TruBridge
Above you can see how the current ROCE for TruBridge compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for TruBridge .
The Trend Of ROCE
In terms of TruBridge's historical ROCE movements, the trend doesn't inspire confidence. Unfortunately the returns on capital have diminished from the 8.5% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on TruBridge becoming one if things continue as they have.
In Conclusion...
In summary, it's unfortunate that TruBridge is generating lower returns from the same amount of capital. Investors must expect better things on the horizon though because the stock has risen 37% in the last five years. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere.
On a separate note, we've found 1 warning sign for TruBridge you'll probably want to know about.