If you're not sure where to start when looking for your next multibagger, there are some important trends to look out for. In particular, I would like to look at two things.First, grow return The first is capital employed (ROCE) and the second is the company's capital growth. amount of capital employed. This shows that it is a compounding machine and the earnings can be continuously reinvested into the business to generate higher profits. Speaking of which, I noticed some big changes. DUG technology Let's take a look at the return on equity for (ASX:DUG).
About Return on Capital Employed (ROCE)
For those who have never used ROCE before, it measures the “return” (pre-tax profit) that a company generates from the capital employed in its business. The formula for this calculation in DUG technology is:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.21 = USD 9 million ÷ (USD 67 million – USD 25 million) (Based on the previous 12 months to December 2023).
So, DUG Technology's ROCE is 21%. That's an impressive return, and not only that, but it's also higher than the average 13% earned by companies in similar industries.
Check out our latest analysis for DUG Technology.
In the graph above, we have measured DUG Technology's previous ROCE compared to its previous performance, but the future is probably more important. If you want, check out forecasts from the analysts covering DUG Technology. free.
What ROCE trends tell us
DUG Technology is showing some positive trends. Over the past five years, return on capital employed has increased significantly to 21%. It is worth noting that the company has virtually increased its return per dollar of capital employed, and the amount of capital has also increased by 29%. This could indicate that there are plenty of opportunities inside to invest capital at ever-higher interest rates, and this combination is common among multibaggers.
However, for the record, the company's current liabilities increased significantly during this period, so some of the increase in ROCE can be attributed to this. Essentially, the company currently has suppliers or short-term creditors funding approximately 37% of its operations, which is not ideal. Be wary of future increases in the ratio of current liabilities to total assets, as this can introduce new risks to your business.
conclusion
Overall, it's great to see that DUG Technology is growing its capital base by benefiting from previous investments. And because the stock has performed so well over the past three years, investors are taking these patterns into account. That said, we still think promising fundamentals mean the company requires further due diligence.
If you want to continue researching DUG technology, 1 warning sign What our analysis revealed.
If you want to find more stocks with high returns, check this out. free This is a list of stocks with strong balance sheets and high return on equity.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
