Will Taiflex Scientific (TPE:8039) Multiply In Value 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Taiflex Scientific (TPE:8039) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What is Return On Capital Employed (ROCE)?

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 Taiflex Scientific:

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

0.12 = NT$987m ÷ (NT$11b - NT$2.8b) (Based on the trailing twelve months to September 2020).

Therefore, Taiflex Scientific has an ROCE of 12%. That's a relatively normal return on capital, and it's around the 10% generated by the Electronic industry.

View our latest analysis for Taiflex Scientific

Above you can see how the current ROCE for Taiflex Scientific compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

The Trend Of ROCE

There hasn't been much to report for Taiflex Scientific's returns and its level of capital employed because both metrics have been steady for the past five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Taiflex Scientific to be a multi-bagger going forward.

What We Can Learn From Taiflex Scientific's ROCE

In a nutshell, Taiflex Scientific has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has gained an impressive 94% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

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

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