Here’s What’s Happening With Returns At Star Comgistic Capital (TPE:4930)

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Star Comgistic Capital (TPE:4930) 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. Analysts use this formula to calculate it for Star Comgistic Capital:

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 9.7%.

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're interested in investigating Star Comgistic Capital's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

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. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

In Conclusion...

To sum it up, Star Comgistic Capital is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 87% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 3 warning signs we've spotted with Star Comgistic Capital (including 2 which shouldn't be ignored) .

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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