Investors Will Want Nan Ya Printed Circuit Board's (TWSE:8046) Growth In ROCE To Persist

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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 Nan Ya Printed Circuit Board's (TWSE:8046) returns on capital, so let's have a look.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Nan Ya Printed Circuit Board:

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

0.041 = NT$2.3b ÷ (NT$69b - NT$11b) (Based on the trailing twelve months to March 2024).

So, Nan Ya Printed Circuit Board has an ROCE of 4.1%. Ultimately, that's a low return and it under-performs the Electronic industry average of 7.0%.

Check out our latest analysis for Nan Ya Printed Circuit Board

Above you can see how the current ROCE for Nan Ya Printed Circuit Board compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Nan Ya Printed Circuit Board .

The Trend Of ROCE

We're delighted to see that Nan Ya Printed Circuit Board is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 4.1% on its capital. And unsurprisingly, like most companies trying to break into the black, Nan Ya Printed Circuit Board is utilizing 72% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line

To the delight of most shareholders, Nan Ya Printed Circuit Board has now broken into profitability. Since the stock has returned a staggering 378% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to know some of the risks facing Nan Ya Printed Circuit Board we've found 2 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

While Nan Ya Printed Circuit Board may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.

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