The Returns At TURVO International (TWSE:2233) Aren't Growing

Simply Wall St · 10/25 22:05

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over TURVO International's (TWSE:2233) trend of ROCE, we liked what we saw.

What Is Return On Capital Employed (ROCE)?

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 TURVO International:

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

0.16 = NT$687m ÷ (NT$5.8b - NT$1.4b) (Based on the trailing twelve months to June 2024).

Thus, TURVO International has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 8.8% it's much better.

Check out our latest analysis for TURVO International

roce
TWSE:2233 Return on Capital Employed October 25th 2024

Above you can see how the current ROCE for TURVO International 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 TURVO International .

How Are Returns Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 44% more capital in the last five years, and the returns on that capital have remained stable at 16%. 16% is a pretty standard return, and it provides some comfort knowing that TURVO International has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

In Conclusion...

To sum it up, TURVO International has simply been reinvesting capital steadily, at those decent rates of return. And long term investors would be thrilled with the 199% return they've received over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

On a final note, we've found 2 warning signs for TURVO International that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.