Stock Analysis

Returns On Capital Are Showing Encouraging Signs At Anli International (GTSM:5223)

TPEX:5223
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If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Speaking of which, we noticed some great changes in Anli International's (GTSM:5223) returns on capital, so let's have a look.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Anli International:

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

0.17 = NT$409m ÷ (NT$3.2b - NT$696m) (Based on the trailing twelve months to December 2020).

Thus, Anli International has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 9.4% it's much better.

Check out our latest analysis for Anli International

roce
GTSM:5223 Return on Capital Employed March 23rd 2021

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Anli International, check out these free graphs here.

The Trend Of ROCE

Investors would be pleased with what's happening at Anli International. Over the last five years, returns on capital employed have risen substantially to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 57% more capital is being employed now too. So we're very much inspired by what we're seeing at Anli International thanks to its ability to profitably reinvest capital.

The Bottom Line On Anli International's 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 Anli International has. Since the stock has returned a staggering 287% to shareholders over the last year, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Anli International can keep these trends up, it could have a bright future ahead.

Anli International does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit unpleasant...

While Anli International 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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