We Like These Underlying Return On Capital Trends At P.C.B. Technologies (TLV:PCBT)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in P.C.B. Technologies' (TLV:PCBT) returns on capital, so let's have a look.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on P.C.B. Technologies is:

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

0.03 = US$2.9m ÷ (US$128m - US$30m) (Based on the trailing twelve months to March 2021).

Thus, P.C.B. Technologies has an ROCE of 3.0%. In absolute terms, that's a low return and it also under-performs the Electronic industry average of 11%.

See our latest analysis for P.C.B. Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for P.C.B. Technologies' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of P.C.B. Technologies, check out these free graphs here.

The Trend Of ROCE

P.C.B. Technologies has recently broken into profitability so their prior investments seem to be paying off. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 3.0% on its capital. And unsurprisingly, like most companies trying to break into the black, P.C.B. Technologies is utilizing 63% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On P.C.B. Technologies' ROCE

In summary, it's great to see that P.C.B. Technologies has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a solid 68% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching P.C.B. Technologies, you might be interested to know about the 1 warning sign that our analysis has discovered.

While P.C.B. Technologies may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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