We Like These Underlying Return On Capital Trends At Dah San Electric Wire & Cable (TWSE:1615)

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Dah San Electric Wire & Cable (TWSE:1615) looks quite promising in regards to its trends of return on capital.

Understanding 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. To calculate this metric for Dah San Electric Wire & Cable, this is the formula:

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

0.19 = NT$609m ÷ (NT$4.5b - NT$1.3b) (Based on the trailing twelve months to December 2023).

So, Dah San Electric Wire & Cable has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Electrical industry average of 6.8% it's much better.

View our latest analysis for Dah San Electric Wire & Cable

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

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Dah San Electric Wire & Cable. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. 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 75%. So we're very much inspired by what we're seeing at Dah San Electric Wire & Cable thanks to its ability to profitably reinvest capital.

What We Can Learn From Dah San Electric Wire & Cable's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Dah San Electric Wire & Cable has. And a remarkable 671% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, Dah San Electric Wire & Cable does come with some risks, and we've found 2 warning signs that you should be aware of.

While Dah San Electric Wire & Cable isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.