Can P-Duke TechnologyLtd (GTSM:8109) Prolong Its Impressive Returns?

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over P-Duke TechnologyLtd's (GTSM:8109) trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

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. The formula for this calculation on P-Duke TechnologyLtd is:

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

0.24 = NT$418m ÷ (NT$3.0b - NT$1.2b) (Based on the trailing twelve months to September 2020).

Therefore, P-Duke TechnologyLtd has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Electrical industry average of 7.1%.

See our latest analysis for P-Duke TechnologyLtd

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'd like to look at how P-Duke TechnologyLtd has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

We'd be pretty happy with returns on capital like P-Duke TechnologyLtd. The company has consistently earned 24% for the last five years, and the capital employed within the business has risen 44% in that time. Now considering ROCE is an attractive 24%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. You'll see this when looking at well operated businesses or favorable business models.

On a separate but related note, it's important to know that P-Duke TechnologyLtd has a current liabilities to total assets ratio of 41%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Our Take On P-Duke TechnologyLtd's ROCE

P-Duke TechnologyLtd has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has followed suit returning a meaningful 67% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

P-Duke TechnologyLtd does have some risks though, and we've spotted 3 warning signs for P-Duke TechnologyLtd that you might be interested in.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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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