Mitake Information (GTSM:8284) Is Doing The Right Things To Multiply Its Share Price

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. So when we looked at Mitake Information (GTSM:8284) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Mitake Information is:

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

0.16 = NT$163m ÷ (NT$1.5b - NT$515m) (Based on the trailing twelve months to December 2020).

So, Mitake Information has an ROCE of 16%. By itself that's a normal return on capital and it's in line with the industry's average returns of 16%.

See our latest analysis for Mitake Information

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

What Can We Tell From Mitake Information's ROCE Trend?

We like the trends that we're seeing from Mitake Information. The data shows that returns on capital have increased substantially over the last five years to 16%. 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 120%. 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 Mitake Information has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 81% return over the last five years. In light of that, we think it's worth looking further into this stock because if Mitake Information can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 4 warning signs facing Mitake Information that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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