HannStar Board (TWSE:5469) Is Looking To Continue Growing Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at HannStar Board (TWSE:5469) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for HannStar Board, this is the formula:

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

0.13 = NT$7.0b ÷ (NT$84b - NT$29b) (Based on the trailing twelve months to June 2024).

So, HannStar Board has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 7.0% it's much better.

See our latest analysis for HannStar Board

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how HannStar Board has performed in the past in other metrics, you can view this free graph of HannStar Board's past earnings, revenue and cash flow.

The Trend Of ROCE

Investors would be pleased with what's happening at HannStar Board. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 13%. The amount of capital employed has increased too, by 34%. So we're very much inspired by what we're seeing at HannStar Board thanks to its ability to profitably reinvest capital.

The Bottom Line On HannStar Board's ROCE

To sum it up, HannStar Board has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 41% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a final note, we've found 1 warning sign for HannStar Board that we think you should be aware of.

While HannStar 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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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.