The Trend Of High Returns At Jinan Acetate Chemical (TPE:4763) Has Us Very Interested

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Jinan Acetate Chemical's (TPE:4763) returns on capital, so let's have a look.

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 Jinan Acetate Chemical:

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

0.23 = NT$499m ÷ (NT$3.1b - NT$916m) (Based on the trailing twelve months to December 2020).

Thus, Jinan Acetate Chemical has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 7.7%.

See our latest analysis for Jinan Acetate Chemical

Above you can see how the current ROCE for Jinan Acetate Chemical compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

Investors would be pleased with what's happening at Jinan Acetate Chemical. The data shows that returns on capital have increased substantially over the last five years to 23%. 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 57%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

All in all, it's terrific to see that Jinan Acetate Chemical is reaping the rewards from prior investments and is growing its capital base. And with a respectable 55% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if Jinan Acetate Chemical can keep these trends up, it could have a bright future ahead.

Jinan Acetate Chemical does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is significant...

Jinan Acetate Chemical is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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