The Return Trends At HannStar Board (TPE:5469) Look Promising

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at HannStar Board (TPE:5469) so let's look a bit deeper.

Understanding 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. The formula for this calculation on HannStar Board is:

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

0.11 = NT$4.7b ÷ (NT$70b - NT$26b) (Based on the trailing twelve months to September 2020).

So, HannStar Board has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.

Check out our latest analysis for HannStar Board

Above you can see how the current ROCE for HannStar Board compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering HannStar Board here for free.

So How Is HannStar Board's ROCE Trending?

HannStar Board is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 37%. So we're very much inspired by what we're seeing at HannStar Board thanks to its ability to profitably reinvest capital.

Our Take On HannStar Board's ROCE

All in all, it's terrific to see that HannStar Board is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing to note, we've identified 3 warning signs with HannStar Board and understanding these should be part of your investment process.

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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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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