The 22% Return On Capital At Universal Vision Biotechnology (GTSM:3218) Got Our Attention

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Universal Vision Biotechnology's (GTSM:3218) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Universal Vision Biotechnology, this is the formula:

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

0.22 = NT$506m ÷ (NT$3.1b - NT$847m) (Based on the trailing twelve months to September 2020).

Thus, Universal Vision Biotechnology has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 8.5% earned by companies in a similar industry.

See our latest analysis for Universal Vision Biotechnology

Above you can see how the current ROCE for Universal Vision Biotechnology 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 Universal Vision Biotechnology here for free.

How Are Returns Trending?

We like the trends that we're seeing from Universal Vision Biotechnology. The data shows that returns on capital have increased substantially over the last five years to 22%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 69%. So we're very much inspired by what we're seeing at Universal Vision Biotechnology thanks to its ability to profitably reinvest capital.

Our Take On Universal Vision Biotechnology's ROCE

To sum it up, Universal Vision Biotechnology has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 1,059% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

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

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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