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

There are a few key trends to look for if we want to identify the next multi-bagger. 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. And in light of that, the trends we're seeing at Jentech Precision Industrial's (TWSE:3653) look very promising so lets take a look.

What Is Return On Capital Employed (ROCE)?

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

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

0.23 = NT$3.1b ÷ (NT$18b - NT$4.8b) (Based on the trailing twelve months to June 2024).

Thus, Jentech Precision Industrial has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 8.8% earned by companies in a similar industry.

View our latest analysis for Jentech Precision Industrial

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jentech Precision Industrial's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Jentech Precision Industrial.

How Are Returns Trending?

Jentech Precision Industrial is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 23%. The amount of capital employed has increased too, by 137%. 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.

Our Take On Jentech Precision Industrial's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Jentech Precision Industrial has. And a remarkable 962% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

Jentech Precision Industrial does have some risks, we noticed 2 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.