Investors Will Want Fulgent Sun International (Holding)'s (TWSE:9802) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Speaking of which, we noticed some great changes in Fulgent Sun International (Holding)'s (TWSE:9802) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Fulgent Sun International (Holding) is:

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

0.13 = NT$1.8b ÷ (NT$19b - NT$4.9b) (Based on the trailing twelve months to December 2023).

Therefore, Fulgent Sun International (Holding) has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 2.8% generated by the Luxury industry.

View our latest analysis for Fulgent Sun International (Holding)

Above you can see how the current ROCE for Fulgent Sun International (Holding) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Fulgent Sun International (Holding) for free.

How Are Returns Trending?

The trends we've noticed at Fulgent Sun International (Holding) are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 13%. The amount of capital employed has increased too, by 78%. So we're very much inspired by what we're seeing at Fulgent Sun International (Holding) thanks to its ability to profitably reinvest capital.

Our Take On Fulgent Sun International (Holding)'s ROCE

To sum it up, Fulgent Sun International (Holding) has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 109% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 2 warning signs for Fulgent Sun International (Holding) that we think you should be aware of.

While Fulgent Sun International (Holding) may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.