Here’s What’s Happening With Returns At Jiin Ming Industry (GTSM:3230)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Jiin Ming Industry's (GTSM:3230) returns on capital, so let's have a look.

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. Analysts use this formula to calculate it for Jiin Ming Industry:

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

0.053 = NT$45m ÷ (NT$1.3b - NT$478m) (Based on the trailing twelve months to September 2020).

Thus, Jiin Ming Industry has an ROCE of 5.3%. Ultimately, that's a low return and it under-performs the Electronic industry average of 11%.

View our latest analysis for Jiin Ming Industry

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 Jiin Ming Industry, check out these free graphs here.

What Does the ROCE Trend For Jiin Ming Industry Tell Us?

It's great to see that Jiin Ming Industry has started to generate some pre-tax earnings from prior investments. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 5.3% on their capital employed. Additionally, the business is utilizing 49% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. Jiin Ming Industry could be selling under-performing assets since the ROCE is improving.

What We Can Learn From Jiin Ming Industry's ROCE

From what we've seen above, Jiin Ming Industry has managed to increase it's returns on capital all the while reducing it's capital base. Considering the stock has delivered 17% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

If you want to continue researching Jiin Ming Industry, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Jiin Ming Industry 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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