There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. 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 Vitzro Tech's (KOSDAQ:042370) returns on capital, so let's have a look.
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. To calculate this metric for Vitzro Tech, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = ₩37b ÷ (₩399b - ₩106b) (Based on the trailing twelve months to September 2020).
Therefore, Vitzro Tech has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Electrical industry average of 6.9% it's much better.
View our latest analysis for Vitzro Tech
Historical performance is a great place to start when researching a stock so above you can see the gauge for Vitzro Tech's ROCE against it's prior returns. If you'd like to look at how Vitzro Tech has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What Can We Tell From Vitzro Tech's ROCE Trend?
Vitzro Tech has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses four years ago, but now it's earning 13% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Vitzro Tech is utilizing 48% more capital than it was four years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
What We Can Learn From Vitzro Tech's ROCE
Overall, Vitzro Tech gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 81% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.
If you'd like to know about the risks facing Vitzro Tech, we've discovered 2 warning signs that you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
When trading Vitzro Tech or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
New: Manage All Your Stock Portfolios in One Place
We've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
About KOSDAQ:A042370
Flawless balance sheet with questionable track record.
