What Can The Trends At Inergy Technology (GTSM:6693) Tell Us About Their Returns?

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Inergy Technology (GTSM:6693) so let's look a bit deeper.

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. The formula for this calculation on Inergy Technology is:

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

0.047 = NT$19m ÷ (NT$655m - NT$255m) (Based on the trailing twelve months to June 2020).

Thus, Inergy Technology has an ROCE of 4.7%. In absolute terms, that's a low return and it also under-performs the Semiconductor industry average of 10%.

Check out our latest analysis for Inergy Technology

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

So How Is Inergy Technology's ROCE Trending?

We're delighted to see that Inergy Technology is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses four years ago, but now it's earning 4.7% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Inergy Technology is utilizing 103% more capital than it was four years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From Inergy Technology's ROCE

To the delight of most shareholders, Inergy Technology has now broken into profitability. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 52% return over the last year. Therefore, we think it would be worth your time to check if these trends are going to continue.

Inergy Technology does come with some risks though, we found 4 warning signs in our investment analysis, and 1 of those is concerning...

While Inergy 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.

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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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