VIA Labs (TPE:6756) Is Achieving High Returns On Its Capital

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of VIA Labs (TPE:6756) looks great, so lets see what the trend can tell us.

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. To calculate this metric for VIA Labs, this is the formula:

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

0.42 = NT$378m ÷ (NT$1.3b - NT$384m) (Based on the trailing twelve months to September 2020).

Thus, VIA Labs has an ROCE of 42%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

Check out our latest analysis for VIA Labs

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're interested in investigating VIA Labs' past further, check out this free graph of past earnings, revenue and cash flow.

So How Is VIA Labs' ROCE Trending?

Investors would be pleased with what's happening at VIA Labs. The data shows that returns on capital have increased substantially over the last three years to 42%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 69%. So we're very much inspired by what we're seeing at VIA Labs thanks to its ability to profitably reinvest capital.

In Conclusion...

To sum it up, VIA Labs has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 152% to shareholders over the last year, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for VIA Labs (of which 1 is a bit concerning!) that you should know about.

VIA Labs is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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