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

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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Loop Telecommunication InternationalInc's (TWSE:3025) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

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 Loop Telecommunication InternationalInc is:

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

0.30 = NT$267m ÷ (NT$1.1b - NT$242m) (Based on the trailing twelve months to September 2024).

So, Loop Telecommunication InternationalInc has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

See 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 is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 495% in that same time. 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 22% 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 sum it up, Loop Telecommunication InternationalInc is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a staggering 296% 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 Loop Telecommunication InternationalInc can keep these trends up, it could have a bright future ahead.

If you want to continue researching Loop Telecommunication InternationalInc, you might be interested to know about the 2 warning signs that our analysis has discovered.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.