LON:ULS) looks attractive right now, so lets see what the trend of returns can tell us.” data-reactid=”28″>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. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of ULS Technology (LON:ULS) looks attractive right now, so lets see what the trend of returns can tell us.
What is Return On Capital Employed (ROCE)?
For those who don’t know, ROCE is a measure of a company’s yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for ULS Technology, this is the formula:
Check out our latest analysis for ULS Technology ” data-reactid=”38″> Check out our latest analysis for ULS Technology
here for free.” data-reactid=”51″>In the above chart we have measured ULS Technology’s prior ROCE against its prior performance, but the future is arguably more important. If you’d like, you can check out the forecasts from the analysts covering ULS Technology here for free.
The Trend Of ROCE
ULS Technology deserves to be commended in regards to it’s returns. The company has consistently earned 28% for the last five years, and the capital employed within the business has risen 70% in that time. With returns that high, it’s great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn’t surprise us if the company became a multi-bagger.
Another point to note, we noticed the company has increased current liabilities over the last five years. This is intriguing because if current liabilities hadn’t increased to 36% of total assets, this reported ROCE would probably be less than28% because total capital employed would be higher.The 28% ROCE could be even lower if current liabilities weren’t 36% of total assets, because the the formula would show a larger base of total capital employed. So while current liabilities isn’t high right now, keep an eye out in case it increases further, because this can introduce some elements of risk.
In short, we’d argue ULS Technology has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. However, over the last five years, the stock has only delivered a 31% return to shareholders who held over that period. So because of the trends we’re seeing, we’d recommend looking further into this stock to see if it has the makings of a multi-bagger.
2 warning signs for ULS Technology you’ll probably want to know about.” data-reactid=”57″>On a separate note, we’ve found 2 warning signs for ULS Technology you’ll probably want to know about.
list of stocks with solid balance sheets that are also earning high returns on equity.” data-reactid=”58″>If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.
Get in touch with us directly. Alternatively, email [email protected].” data-reactid=”59″>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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