A Look Into Solidwizard Technology's (GTSM:8416) Impressive Returns On Capital

By
Simply Wall St
Published
January 20, 2021
TPEX:8416
Source: Shutterstock

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at Solidwizard Technology (GTSM:8416), we liked what we saw.

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. Analysts use this formula to calculate it for Solidwizard Technology:

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

0.31 = NT$325m ÷ (NT$1.3b - NT$218m) (Based on the trailing twelve months to September 2020).

Therefore, Solidwizard Technology has an ROCE of 31%. That's a fantastic return and not only that, it outpaces the average of 19% earned by companies in a similar industry.

Check out our latest analysis for Solidwizard Technology

roce
GTSM:8416 Return on Capital Employed January 21st 2021

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

So How Is Solidwizard Technology's ROCE Trending?

In terms of Solidwizard Technology's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 31% and the business has deployed 47% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

In Conclusion...

Solidwizard Technology has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And the stock has followed suit returning a meaningful 96% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you'd like to know about the risks facing Solidwizard Technology, we've discovered 1 warning sign that you should be aware of.

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. 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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Simply Wall St is focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of data scientists and multiple equity analysts with over two decades worth of financial markets experience between them.