What Do The Returns At Tailyn Technologies (GTSM:5353) Mean Going Forward?

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. With that in mind, we've noticed some promising trends at Tailyn Technologies (GTSM:5353) so let's look a bit deeper.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Tailyn Technologies is:

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

0.066 = NT$78m ÷ (NT$1.5b - NT$364m) (Based on the trailing twelve months to September 2020).

Therefore, Tailyn Technologies has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Communications industry average of 9.8%.

Check out our latest analysis for Tailyn Technologies

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

How Are Returns Trending?

Tailyn Technologies' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 1,844% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

Our Take On Tailyn Technologies' ROCE

To bring it all together, Tailyn Technologies has done well to increase the returns it's generating from its capital employed. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 83% return over the last five years. In light of that, we think it's worth looking further into this stock because if Tailyn Technologies can keep these trends up, it could have a bright future ahead.

Like most companies, Tailyn Technologies does come with some risks, and we've found 2 warning signs that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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