Will Dynamic Medical Technologies (GTSM:4138) Multiply In Value Going Forward?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Dynamic Medical Technologies (GTSM:4138), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What is it?

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 Dynamic Medical Technologies:

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

0.091 = NT$142m ÷ (NT$2.1b - NT$539m) (Based on the trailing twelve months to September 2020).

Thus, Dynamic Medical Technologies has an ROCE of 9.1%. Ultimately, that's a low return and it under-performs the Medical Equipment industry average of 12%.

Check out our latest analysis for Dynamic Medical Technologies

Historical performance is a great place to start when researching a stock so above you can see the gauge for Dynamic Medical Technologies' ROCE against it's prior returns. If you're interested in investigating Dynamic Medical Technologies' past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Over the past five years, Dynamic Medical Technologies' ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Dynamic Medical Technologies doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Dynamic Medical Technologies' ROCE

In a nutshell, Dynamic Medical Technologies has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 7.8% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

On a final note, we found 2 warning signs for Dynamic Medical Technologies (1 is potentially serious) you should be aware of.

While Dynamic Medical Technologies isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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