Why We Like The Returns At Jentech Precision Industrial (TWSE:3653)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Jentech Precision Industrial (TWSE:3653) we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Jentech Precision Industrial, this is the formula:

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

0.20 = NT$2.7b ÷ (NT$16b - NT$2.8b) (Based on the trailing twelve months to December 2023).

Therefore, Jentech Precision Industrial has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 8.0% earned by companies in a similar industry.

See our latest analysis for Jentech Precision Industrial

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'd like to look at how Jentech Precision Industrial has performed in the past in other metrics, you can view this free graph of Jentech Precision Industrial's past earnings, revenue and cash flow.

What Can We Tell From Jentech Precision Industrial's ROCE Trend?

Investors would be pleased with what's happening at Jentech Precision Industrial. The data shows that returns on capital have increased substantially over the last five years to 20%. The amount of capital employed has increased too, by 129%. 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.

What We Can Learn From Jentech Precision Industrial's ROCE

All in all, it's terrific to see that Jentech Precision Industrial is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 992% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing Jentech Precision Industrial, we've discovered 2 warning signs that you should be aware of.

Jentech Precision Industrial 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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.