Evergreen Aviation Technologies (TWSE:2645) Might Have The Makings Of A Multi-Bagger

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Evergreen Aviation Technologies (TWSE:2645) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

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 Evergreen Aviation Technologies is:

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

0.11 = NT$2.1b ÷ (NT$24b - NT$4.9b) (Based on the trailing twelve months to March 2024).

So, Evergreen Aviation Technologies has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 9.3% generated by the Aerospace & Defense industry.

View our latest analysis for Evergreen Aviation Technologies

Above you can see how the current ROCE for Evergreen Aviation Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Evergreen Aviation Technologies .

So How Is Evergreen Aviation Technologies' ROCE Trending?

You'd find it hard not to be impressed with the ROCE trend at Evergreen Aviation Technologies. We found that the returns on capital employed over the last five years have risen by 62%. The company is now earning NT$0.1 per dollar of capital employed. Interestingly, the business may be becoming more efficient because it's applying 27% less capital than it was five years ago. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

The Bottom Line

In summary, it's great to see that Evergreen Aviation Technologies has been able to turn things around and earn higher returns on lower amounts of capital. Given the stock has declined 11% in the last year, this could be a good investment if the valuation and other metrics are also appealing. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to continue researching Evergreen Aviation Technologies, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Evergreen Aviation Technologies 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.