The Return Trends At UNIC Technology (GTSM:5452) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. 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 UNIC Technology's (GTSM:5452) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on UNIC Technology is:

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

0.11 = NT$261m ÷ (NT$3.6b - NT$1.3b) (Based on the trailing twelve months to December 2020).

So, UNIC Technology has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Trade Distributors industry average of 12%.

Check out our latest analysis for UNIC Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for UNIC Technology's ROCE against it's prior returns. If you'd like to look at how UNIC Technology has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For UNIC Technology Tell Us?

UNIC Technology's ROCE growth is quite impressive. 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 331% 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.

What We Can Learn From UNIC Technology's ROCE

To bring it all together, UNIC Technology has done well to increase the returns it's generating from its capital employed. And a remarkable 207% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if UNIC Technology can keep these trends up, it could have a bright future ahead.

If you want to know some of the risks facing UNIC Technology we've found 2 warning signs (1 is significant!) that you should be aware of before investing here.

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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