AAEON Technology (TWSE:6579) Still Has a Way to Go to Become a Multi-Bagger

If you want to identify the next multi-bagger, there are a few key trends to watch. In particular, there are two things you should look out for. First, return Return on Invested Capital (ROCE) and secondly, the company’s amount More than 100% of invested capital. This means the company has a good business model and plenty of opportunity for profitable reinvestment. AAEON Technology (TWSE:6579) We’re not surprised by the return trend, but let’s take a closer look.

What is Return on Invested Capital (ROCE)?

For those unfamiliar with ROCE, it measures the “return on investment” (profit before tax) a company generates from the capital employed in its business, and the formula for calculating this metric for AAEON Technology is:

Return on Invested Capital = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)

0.065 = NT$860m ÷ (NT$150 billion – NT$2.1 billion) (Based on the trailing 12 months ending March 2024).

therefore, AAEON Technology’s ROCE is 6.5%. All told, this is a low return, below the tech industry average of 11%.

Read our latest analysis on AAEON Technology

Past performance is a great starting point when researching a stock. Above you can see metrics comparing AAEON Technology’s ROCE to its past earnings. If you want to see how AAEON Technology has performed on other metrics in the past you can do so here. free A graph of AAEON Technology’s historical earnings, revenue and cash flow.

So how is AAEON Technology’s ROCE trending?

There are other companies with higher returns on capital than we see with AAEON Technology. The company has deployed 53% more capital over the past five years, yet its return on capital has remained steady at 6.5%. Given that the company has increased the amount of capital it has deployed, it appears that previous investments simply do not have a high return on capital.

The conclusion is…

As we saw above, AAEON Technology’s return on capital is not growing, but the company is reinvesting in the business. However, for long term shareholders, the stock has delivered an astounding 156% return over the past five years, and the market seems optimistic about the company’s future. However, if these fundamental trend trajectories continue, we don’t think it’s likely the company will deliver multiples of profits going forward.

If you want to continue researching AAEON technology, here’s what you should know: Two Warning Signs was found by our analysis.

AAEON Technology doesn’t have the highest returns, but check this out: free A list of companies with healthy balance sheets and high return on equity.

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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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