Stock Analysis

What Do The Returns At Techno Quartz (TYO:5217) Mean Going Forward?

TSE:5217
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If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. So when we looked at Techno Quartz (TYO:5217) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Techno Quartz is:

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

0.19 = JP¥2.2b ÷ (JP¥15b - JP¥2.7b) (Based on the trailing twelve months to December 2020).

Therefore, Techno Quartz has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 9.8% it's much better.

View our latest analysis for Techno Quartz

roce
JASDAQ:5217 Return on Capital Employed February 16th 2021

Historical performance is a great place to start when researching a stock so above you can see the gauge for Techno Quartz's ROCE against it's prior returns. If you're interested in investigating Techno Quartz's past further, check out this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Techno Quartz is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 19%. Basically the business is earning more per dollar of capital invested and in addition to that, 65% more capital is being employed now too. So we're very much inspired by what we're seeing at Techno Quartz thanks to its ability to profitably reinvest capital.

Our Take On Techno Quartz's ROCE

In summary, it's great to see that Techno Quartz can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 493% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation that compares the share price and estimated value.

While Techno Quartz isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. 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.
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