Will the Promising Trends At Tiong Woon Corporation Holding (SGX:BQM) Continue?

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at Tiong Woon Corporation Holding (SGX:BQM) and its trend of ROCE, we really liked what we saw.

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 Tiong Woon Corporation Holding is:

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

0.039 = S$16m ÷ (S$461m - S$60m) (Based on the trailing twelve months to June 2020).

Therefore, Tiong Woon Corporation Holding has an ROCE of 3.9%. Even though it's in line with the industry average of 4.4%, it's still a low return by itself.

View our latest analysis for Tiong Woon Corporation Holding

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

What Does the ROCE Trend For Tiong Woon Corporation Holding Tell Us?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 46% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

In summary, we're delighted to see that Tiong Woon Corporation Holding has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 66% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Tiong Woon Corporation Holding can keep these trends up, it could have a bright future ahead.

If you want to continue researching Tiong Woon Corporation Holding, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.

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