We Like These Underlying Trends At Ve Wong (TPE:1203)

There are a few key trends to look for if we want to identify the next 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Ve Wong (TPE:1203) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Ve Wong:

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

0.13 = NT$974m ÷ (NT$9.3b - NT$1.8b) (Based on the trailing twelve months to September 2020).

Therefore, Ve Wong has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 8.5% it's much better.

View our latest analysis for Ve Wong

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

So How Is Ve Wong's ROCE Trending?

Ve Wong is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 39% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

To sum it up, Ve Wong is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 93% 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. In light of that, we think it's worth looking further into this stock because if Ve Wong can keep these trends up, it could have a bright future ahead.

Ve Wong does have some risks though, and we've spotted 1 warning sign for Ve Wong that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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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