We Like AirTAC International Group's (TPE:1590) Returns And Here's How They're Trending

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. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in AirTAC International Group's (TPE:1590) returns on capital, so let's have a look.

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 AirTAC International Group is:

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

0.22 = NT$6.0b ÷ (NT$41b - NT$15b) (Based on the trailing twelve months to December 2020).

Thus, AirTAC International Group has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Machinery industry average of 9.5%.

Check out our latest analysis for AirTAC International Group

In the above chart we have measured AirTAC International Group's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

What Does the ROCE Trend For AirTAC International Group Tell Us?

We like the trends that we're seeing from AirTAC International Group. The data shows that returns on capital have increased substantially over the last five years to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 100% more capital is being employed now too. So we're very much inspired by what we're seeing at AirTAC International Group thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, AirTAC International Group has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing AirTAC International Group, we've discovered 1 warning sign that you should be aware of.

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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