The Return Trends At Tai Roun ProductsLtd (TWSE:1220) Look Promising

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So on that note, Tai Roun ProductsLtd (TWSE:1220) 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 Tai Roun ProductsLtd:

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

0.086 = NT$241m ÷ (NT$3.2b - NT$386m) (Based on the trailing twelve months to March 2024).

So, Tai Roun ProductsLtd has an ROCE of 8.6%. In absolute terms, that's a low return but it's around the Food industry average of 8.2%.

Check out our latest analysis for Tai Roun ProductsLtd

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 Tai Roun ProductsLtd has performed in the past in other metrics, you can view this free graph of Tai Roun ProductsLtd's past earnings, revenue and cash flow.

The Trend Of ROCE

Tai Roun ProductsLtd has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 113% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Tai Roun ProductsLtd's ROCE

To sum it up, Tai Roun ProductsLtd is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 100% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Tai Roun ProductsLtd can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for Tai Roun ProductsLtd (1 is a bit unpleasant) you should be aware of.

While Tai Roun ProductsLtd 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.