The Trends At Fuzetec Technology (GTSM:6642) That You Should Know About

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. That's why when we briefly looked at Fuzetec Technology's (GTSM:6642) ROCE trend, we were pretty happy with what we saw.

Understanding 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. Analysts use this formula to calculate it for Fuzetec Technology:

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

0.16 = NT$91m ÷ (NT$685m - NT$105m) (Based on the trailing twelve months to September 2020).

So, Fuzetec Technology has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 11% generated by the Electronic industry.

See our latest analysis for Fuzetec 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'd like to look at how Fuzetec Technology has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Fuzetec Technology's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 69% more capital in the last five years, and the returns on that capital have remained stable at 16%. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

To sum it up, Fuzetec Technology has simply been reinvesting capital steadily, at those decent rates of return. And the stock has followed suit returning a meaningful 92% to shareholders over the last three years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

One more thing, we've spotted 3 warning signs facing Fuzetec Technology that you might find interesting.

While Fuzetec 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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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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