Returns At FIC Global (TWSE:3701) Are On The Way Up

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Speaking of which, we noticed some great changes in FIC Global's (TWSE:3701) returns on capital, so let's have 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 FIC Global is:

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

0.098 = NT$749m ÷ (NT$12b - NT$4.3b) (Based on the trailing twelve months to September 2023).

Therefore, FIC Global has an ROCE of 9.8%. On its own that's a low return, but compared to the average of 6.9% generated by the Electronic industry, it's much better.

Check out our latest analysis for FIC Global

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

What The Trend Of ROCE Can Tell Us

The fact that FIC Global is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 9.8% on its capital. Not only that, but the company is utilizing 65% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On FIC Global's ROCE

To the delight of most shareholders, FIC Global has now broken into profitability. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if FIC Global can keep these trends up, it could have a bright future ahead.

FIC Global does have some risks though, and we've spotted 1 warning sign for FIC Global that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.