The Return Trends At Apex Science & Engineering (TWSE:3052) Look Promising

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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 when we looked at Apex Science & Engineering (TWSE:3052) and its trend of ROCE, we really liked what we saw.

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. The formula for this calculation on Apex Science & Engineering is:

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

0.053 = NT$210m ÷ (NT$9.9b - NT$5.9b) (Based on the trailing twelve months to March 2024).

Therefore, Apex Science & Engineering has an ROCE of 5.3%. Ultimately, that's a low return and it under-performs the Construction industry average of 12%.

View our latest analysis for Apex Science & Engineering

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 Apex Science & Engineering has performed in the past in other metrics, you can view this free graph of Apex Science & Engineering's past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that Apex Science & Engineering is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 5.3% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Apex Science & Engineering is utilizing 20% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

On a separate but related note, it's important to know that Apex Science & Engineering has a current liabilities to total assets ratio of 59%, 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 Apex Science & Engineering's ROCE

Long story short, we're delighted to see that Apex Science & Engineering's reinvestment activities have paid off and the company is now profitable. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 71% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

If you want to continue researching Apex Science & Engineering, you might be interested to know about the 3 warning signs that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com