Is Bizlink Holding (TPE:3665) Likely To Turn Things Around?

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. That's why when we briefly looked at Bizlink Holding's (TPE:3665) ROCE trend, we were pretty happy with what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Bizlink Holding:

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

0.15 = NT$2.5b ÷ (NT$21b - NT$4.7b) (Based on the trailing twelve months to September 2020).

Thus, Bizlink Holding has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 7.1% generated by the Electrical industry.

See our latest analysis for Bizlink Holding

In the above chart we have measured Bizlink Holding's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Bizlink Holding here for free.

What Does the ROCE Trend For Bizlink Holding Tell Us?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 244% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Bizlink Holding has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

In the end, Bizlink Holding has proven its ability to adequately reinvest capital at good rates of return. And long term investors would be thrilled with the 119% return they've received over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Bizlink Holding does have some risks though, and we've spotted 2 warning signs for Bizlink Holding that you might be interested in.

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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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