Does Star Comgistic Capital (TPE:4930) Have The Makings Of A Multi-Bagger?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Speaking of which, we noticed some great changes in Star Comgistic Capital's (TPE:4930) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

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 Star Comgistic Capital is:

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

0.062 = NT$568m ÷ (NT$14b - NT$4.7b) (Based on the trailing twelve months to September 2020).

Therefore, Star Comgistic Capital has an ROCE of 6.2%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 10%.

See our latest analysis for Star Comgistic Capital

Historical performance is a great place to start when researching a stock so above you can see the gauge for Star Comgistic Capital's ROCE against it's prior returns. If you'd like to look at how Star Comgistic Capital has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Star Comgistic Capital's ROCE Trending?

We're delighted to see that Star Comgistic Capital is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 6.2% on its capital. While returns have increased, the amount of capital employed by Star Comgistic Capital has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

The Key Takeaway

In summary, we're delighted to see that Star Comgistic Capital has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 34% to shareholders. So with that in mind, we think the stock deserves further research.

One more thing: We've identified 5 warning signs with Star Comgistic Capital (at least 2 which shouldn't be ignored) , and understanding them would certainly be useful.

While Star Comgistic Capital 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. 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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