Guidewire Software Inc (GWRE)
Return on total capital
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 62,606 | -20,100 | -127,378 | -210,269 | -85,570 |
| Long-term debt | US$ in thousands | — | — | — | — | — |
| Total stockholders’ equity | US$ in thousands | 1,457,230 | 1,342,730 | 1,199,470 | 1,451,660 | 1,544,890 |
| Return on total capital | 4.30% | -1.50% | -10.62% | -14.48% | -5.54% |
July 31, 2025 calculation
Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $62,606K ÷ ($—K + $1,457,230K)
= 4.30%
The analysis of Guidewire Software Inc.'s return on total capital (ROTC) over the specified periods indicates significant fluctuations with a general trend toward improvement. On July 31, 2021, the company exhibited a negative ROTC of -5.54%, reflecting that the company's earnings were insufficient to cover its total capital investments during that period. This negative figure persisted and worsened by July 31, 2022, reaching -14.48%, which suggests a decline in profitability relative to the total capital employed, possibly due to increased costs, lower earnings, or higher capital investments that did not generate proportional returns.
A partial recovery is observed by July 31, 2023, with the ROTC improving to -10.62%, indicating some reduction in the gap between earnings and capital utilization but still remaining negative. The trend of improvement continues into July 31, 2024, as the ROTC approaches closer to break-even at -1.50%. This suggests that the company has been making strides in enhancing its efficiency and profitability relative to its total capital, reducing the previous losses.
Most notably, by July 31, 2025, the return on total capital turns positive, reaching 4.30%. This signifies that the company has begun generating operational profits sufficient to cover and exceed its total capital, reflecting a noteworthy turnaround in financial performance and operational efficiency.
Overall, the progression from negative to positive ROTC over the observed period represents a positive development, indicating that Guidewire Software Inc. has been on a path toward improving its ability to generate returns on its invested capital. Nonetheless, the period of substantial negative returns underscores the importance of continued efforts to sustain and enhance profitability to maintain and grow this positive trajectory.