Returns on Capital Paint A Bright Future For Tecnoglass (NYSE:TGLS)

There are a few key trends to look for if we want to identify the next multi-bagger. 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. And in light of that, the trends we're seeing at Tecnoglass' (NYSE:TGLS) look very promising so lets take a look.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Tecnoglass, this is the formula:

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

0.29 = US$251m ÷ (US$1.2b - US$320m) (Based on the trailing twelve months to June 2025).

So, Tecnoglass has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Building industry average of 13%.

See our latest analysis for Tecnoglass

Above you can see how the current ROCE for Tecnoglass compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Tecnoglass for free.

What Can We Tell From Tecnoglass' ROCE Trend?

Tecnoglass is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 29%. The amount of capital employed has increased too, by 105%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

In Conclusion...

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 Tecnoglass has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

While Tecnoglass looks impressive, no company is worth an infinite price. The intrinsic value infographic for TGLS helps visualize whether it is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.