We Like Hyweb Technology's (GTSM:5212) Returns And Here's How They're Trending

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. And in light of that, the trends we're seeing at Hyweb Technology's (GTSM:5212) look very promising so lets take a look.

What is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Hyweb Technology is:

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

0.24 = NT$132m ÷ (NT$859m - NT$306m) (Based on the trailing twelve months to December 2020).

Therefore, Hyweb Technology has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 17% earned by companies in a similar industry.

See our latest analysis for Hyweb Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hyweb Technology's ROCE against it's prior returns. If you'd like to look at how Hyweb Technology has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Hyweb Technology. Over the last five years, returns on capital employed have risen substantially to 24%. The amount of capital employed has increased too, by 25%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

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 Hyweb Technology has. And a remarkable 325% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Hyweb Technology can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 3 warning signs facing Hyweb Technology 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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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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