Will the Promising Trends At T3EX Global Holdings (TPE:2636) Continue?

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at T3EX Global Holdings (TPE:2636) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on T3EX Global Holdings is:

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

0.17 = NT$562m ÷ (NT$6.7b - NT$3.5b) (Based on the trailing twelve months to September 2020).

Therefore, T3EX Global Holdings has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 11% generated by the Logistics industry.

Check out our latest analysis for T3EX Global Holdings

In the above chart we have measured T3EX Global Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for T3EX Global Holdings.

So How Is T3EX Global Holdings' ROCE Trending?

T3EX Global Holdings is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 71% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

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 52% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. And with current liabilities at those levels, that's pretty high.

The Key Takeaway

To bring it all together, T3EX Global Holdings has done well to increase the returns it's generating from its capital employed. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 69% return over the last five years. In light of that, we think it's worth looking further into this stock because if T3EX Global Holdings can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 2 warning signs facing T3EX Global Holdings that you might find interesting.

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This article by Simply Wall St is general in nature. 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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