Nan Ya Printed Circuit Board (TPE:8046) Is Doing The Right Things To Multiply Its Share Price

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Nan Ya Printed Circuit Board (TPE:8046) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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 Nan Ya Printed Circuit Board, this is the formula:

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

0.11 = NT$4.1b ÷ (NT$45b - NT$8.3b) (Based on the trailing twelve months to December 2020).

Thus, Nan Ya Printed Circuit 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%.

See our latest analysis for Nan Ya Printed Circuit Board

In the above chart we have measured Nan Ya Printed Circuit Board's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

We're delighted to see that Nan Ya Printed Circuit Board is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 11% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

Our Take On Nan Ya Printed Circuit Board's ROCE

To sum it up, Nan Ya Printed Circuit Board is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 1,093% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Nan Ya Printed Circuit Board can keep these trends up, it could have a bright future ahead.

Nan Ya Printed Circuit Board does have some risks though, and we've spotted 1 warning sign for Nan Ya Printed Circuit Board that you might be interested in.

While Nan Ya Printed Circuit Board 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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