- Retail Distributors
Ossia International (SGX:O08) Might Have The Makings Of A Multi-Bagger
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Ossia International (SGX:O08) so let's look a bit deeper.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for Ossia International:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.061 = S$3.0m ÷ (S$56m - S$6.6m) (Based on the trailing twelve months to September 2022).
So, Ossia International has an ROCE of 6.1%. On its own, that's a low figure but it's around the 5.2% average generated by the Retail Distributors industry.
Check out our latest analysis for Ossia International
Historical performance is a great place to start when researching a stock so above you can see the gauge for Ossia International's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Ossia International, check out these free graphs here.
So How Is Ossia International's ROCE Trending?
The fact that Ossia International is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 6.1% which is a sight for sore eyes. In addition to that, Ossia International is employing 42% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
On a related note, the company's ratio of current liabilities to total assets has decreased to 12%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So this improvement in ROCE has come from the business' underlying economics, which is great to see.
The Key Takeaway
To the delight of most shareholders, Ossia International has now broken into profitability. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 92% return over the last five years. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
Ossia International does come with some risks though, we found 4 warning signs in our investment analysis, and 2 of those make us uncomfortable...
While Ossia International 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.
Valuation is complex, but we're helping make it simple.
Find out whether Ossia International is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.View the Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Ossia International Limited, an investment holding company, imports, distributes, and retails apparel, sporting goods, footwear, accessories, bags, and golf products primarily in Taiwan.
Flawless balance sheet with proven track record.