Stock Analysis

Should You Invest In NANTEX Industry (TPE:2108)?

TWSE:2108
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If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Speaking of which, we noticed some great changes in NANTEX Industry's (TPE:2108) returns on capital, so let's have a look.

What is 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. The formula for this calculation on NANTEX Industry is:

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

0.28 = NT$2.7b ÷ (NT$11b - NT$1.6b) (Based on the trailing twelve months to September 2020).

So, NANTEX Industry has an ROCE of 28%. That's a fantastic return and not only that, it outpaces the average of 6.7% earned by companies in a similar industry.

See our latest analysis for NANTEX Industry

roce
TSEC:2108 Return on Capital Employed January 17th 2021

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're interested in investigating NANTEX Industry's past further, check out this free graph of past earnings, revenue and cash flow.

What Can We Tell From NANTEX Industry's ROCE Trend?

The trends we've noticed at NANTEX Industry are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 28%. The amount of capital employed has increased too, by 31%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

All in all, it's terrific to see that NANTEX Industry is reaping the rewards from prior investments and is growing its capital base. And a remarkable 280% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 2 warning signs facing NANTEX Industry that you might find interesting.

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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Valuation is complex, but we're here to simplify it.

Discover if NANTEX Industry might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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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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About TWSE:2108

NANTEX Industry

Nantex Industry Co., Ltd., together with its subsidiaries, manufactures, processes, and sells various types of latex, rubber, and related products in Taiwan, China, Thailand, Malaysia, and internationally.

Flawless balance sheet low.