Cyberlinks (TSE:3683) Might Have The Makings Of A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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 Cyberlinks (TSE:3683) 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. The formula for this calculation on Cyberlinks is:

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

0.13 = JP¥1.3b ÷ (JP¥15b - JP¥4.6b) (Based on the trailing twelve months to March 2025).

Thus, Cyberlinks has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 15% generated by the IT industry.

View our latest analysis for Cyberlinks

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

How Are Returns Trending?

The trends we've noticed at Cyberlinks are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 39%. So we're very much inspired by what we're seeing at Cyberlinks thanks to its ability to profitably reinvest capital.

Our Take On Cyberlinks' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Cyberlinks has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 52% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

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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.