Returns On Capital Are A Standout For Loop Telecommunication InternationalInc (TWSE:3025)

If you're looking for a multi-bagger, there's a few things to 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. 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 the ROCE trend of Loop Telecommunication InternationalInc (TWSE:3025) we really liked 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. The formula for this calculation on Loop Telecommunication InternationalInc is:

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

0.21 = NT$169m ÷ (NT$1.1b - NT$333m) (Based on the trailing twelve months to June 2024).

Therefore, Loop Telecommunication InternationalInc has an ROCE of 21%. That's a fantastic return and not only that, it outpaces the average of 9.3% earned by companies in a similar industry.

View our latest analysis for Loop Telecommunication InternationalInc

Historical performance is a great place to start when researching a stock so above you can see the gauge for Loop Telecommunication InternationalInc's ROCE against it's prior returns. If you're interested in investigating Loop Telecommunication InternationalInc's past further, check out this free graph covering Loop Telecommunication InternationalInc's past earnings, revenue and cash flow.

So How Is Loop Telecommunication InternationalInc's ROCE Trending?

Loop Telecommunication InternationalInc's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 391% over the last five years. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. The current liabilities has increased to 29% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

Our Take On Loop Telecommunication InternationalInc's ROCE

To bring it all together, Loop Telecommunication InternationalInc has done well to increase the returns it's generating from its capital employed. And a remarkable 235% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Loop Telecommunication InternationalInc can keep these trends up, it could have a bright future ahead.

If you'd like to know more about Loop Telecommunication InternationalInc, we've spotted 2 warning signs, and 1 of them is a bit concerning.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.