Will Bioteque (GTSM:4107) Multiply In Value Going Forward?

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. With that in mind, the ROCE of Bioteque (GTSM:4107) looks decent, right now, so lets see what the trend of returns can tell us.

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 Bioteque:

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

0.20 = NT$575m ÷ (NT$3.4b - NT$426m) (Based on the trailing twelve months to September 2020).

Thus, Bioteque has an ROCE of 20%. In absolute terms, that's a satisfactory return, but compared to the Medical Equipment industry average of 12% it's much better.

View our latest analysis for Bioteque

Above you can see how the current ROCE for Bioteque compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Bioteque.

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 20% and the business has deployed 49% more capital into its operations. Since 20% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

What We Can Learn From Bioteque's ROCE

In the end, Bioteque has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 8.6% over the last five years for shareholders who have owned the stock in this period. So to determine if Bioteque is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

On a separate note, we've found 1 warning sign for Bioteque you'll probably want to know about.

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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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