Will EPS Bio Technology (GTSM:4183) Multiply In Value Going Forward?

By
Simply Wall St
Published
March 20, 2021
TPEX:4183
Source: Shutterstock

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at EPS Bio Technology (GTSM:4183), it didn't seem to tick all of these boxes.

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. The formula for this calculation on EPS Bio Technology is:

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

0.10 = NT$45m ÷ (NT$547m - NT$111m) (Based on the trailing twelve months to December 2020).

So, EPS Bio Technology has an ROCE of 10%. That's a relatively normal return on capital, and it's around the 12% generated by the Medical Equipment industry.

View our latest analysis for EPS Bio Technology

roce
GTSM:4183 Return on Capital Employed March 21st 2021

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

What Can We Tell From EPS Bio Technology's ROCE Trend?

On the surface, the trend of ROCE at EPS Bio Technology doesn't inspire confidence. Over the last five years, returns on capital have decreased to 10% from 15% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

Our Take On EPS Bio Technology's ROCE

In summary, EPS Bio Technology is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Since the stock has gained an impressive 59% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a final note, we've found 2 warning signs for EPS Bio Technology that we think you should be aware of.

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

When trading EPS Bio Technology or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.