Stock Analysis

Will the Promising Trends At Anli International (GTSM:5223) Continue?

TPEX:5223
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Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Anli International's (GTSM:5223) returns on capital, so let's have a look.

What is 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. The formula for this calculation on Anli International is:

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

0.17 = NT$338m ÷ (NT$2.7b - NT$706m) (Based on the trailing twelve months to September 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 9.3% it's much better.

Check out our latest analysis for Anli International

roce
GTSM:5223 Return on Capital Employed December 23rd 2020

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

How Are Returns Trending?

We like the trends that we're seeing from Anli International. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 17%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 25%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

To sum it up, Anli International has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 76% awarded to those who held the stock over the last year, 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 Anli International can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 1 warning sign for Anli International you'll probably want to know about.

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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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.
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