Global Brands Manufacture (TWSE:6191) Might Have The Makings Of A Multi-Bagger

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. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. With that in mind, we've noticed some promising trends at Global Brands Manufacture (TWSE:6191) so let's look a bit deeper.

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

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 Global Brands Manufacture, this is the formula:

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

0.15 = NT$4.0b ÷ (NT$40b - NT$14b) (Based on the trailing twelve months to June 2024).

So, Global Brands Manufacture has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 6.8% generated by the Electronic industry.

See our latest analysis for Global Brands Manufacture

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 Global Brands Manufacture has performed in the past in other metrics, you can view this free graph of Global Brands Manufacture's past earnings, revenue and cash flow.

What Can We Tell From Global Brands Manufacture's ROCE Trend?

Investors would be pleased with what's happening at Global Brands Manufacture. Over the last five years, returns on capital employed have risen substantially to 15%. The amount of capital employed has increased too, by 35%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Global Brands Manufacture's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Global Brands Manufacture has. 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 Global Brands Manufacture can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with Global Brands Manufacture and understanding this should be part of your investment process.

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.

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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.