SYSAGE Technology (TPE:6112) Has Some Way To Go To Become A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of SYSAGE Technology (TPE:6112) looks decent, right now, so lets see what the trend of returns can tell us.

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. To calculate this metric for SYSAGE Technology, this is the formula:

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

0.13 = NT$650m ÷ (NT$8.1b - NT$3.1b) (Based on the trailing twelve months to December 2020).

So, SYSAGE Technology has an ROCE of 13%. In isolation, that's a pretty standard return but against the IT industry average of 17%, it's not as good.

Check out our latest analysis for SYSAGE Technology

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 want to delve into the historical earnings, revenue and cash flow of SYSAGE Technology, check out these free graphs here.

So How Is SYSAGE Technology's ROCE Trending?

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 13% for the last five years, and the capital employed within the business has risen 155% in that time. 13% is a pretty standard return, and it provides some comfort knowing that SYSAGE Technology has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

On a side note, SYSAGE Technology has done well to reduce current liabilities to 39% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

What We Can Learn From SYSAGE Technology's ROCE

The main thing to remember is that SYSAGE Technology has proven its ability to continually reinvest at respectable rates of return. On top of that, the stock has rewarded shareholders with a remarkable 178% return to those who've held over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

On a separate note, we've found 1 warning sign for SYSAGE Technology you'll probably want to know about.

While SYSAGE Technology isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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