Yield trends at Sunex (WSE: SNX) look promising
Did you know that certain financial measures can provide clues about a potential multi-bagger? First, we will want to see a to recover on capital employed (ROCE) which increases and, on the other hand, a based capital employed. This shows us that it is a composing machine, capable of continually reinvesting its profits in the business and generating higher returns. With that in mind, we’ve noticed some promising trends at Sunex (WSE: SNX) So let’s look a little deeper.
What is Return on Employee Capital (ROCE)?
For those who don’t know what ROCE is, it measures the amount of pre-tax profit a business can generate from the capital employed in its business. Analysts use this formula to calculate it for Sunex:
Return on capital employed = Profit before interest and taxes (EBIT) Ã· (Total assets – Current liabilities)
0.16 = zÅ9.4m Ã· (zÅ100m – zÅ40m) (Based on the last twelve months up to June 2021).
Therefore, Sunex has a ROCE of 16%. On its own, that’s a standard return, but it’s far better than the 8.4% generated by the machinery industry.
Check out our latest review for Sunex
Although the past is not representative of the future, it can be useful to know the historical performance of a company, which is why we have this graph above. If you want to investigate more about Sunex’s past, check out this free graph of past income, income and cash flow.
The ROCE trend
Sunex is showing positive trends. Figures show that over the past five years, returns on capital employed have increased dramatically to 16%. Basically the business earns more per dollar of capital invested and on top of that 119% more capital is also being used up now. Increasing returns on an increasing amount of capital are common among multi-baggers and that is why we are impressed.
The bottom line
A business that increases its returns on capital and can constantly reinvest in itself is a highly desirable trait, and that is what Sunex has. And as the stock has performed exceptionally well over the past five years, these trends are being taken into account by investors. Therefore, we believe it would be worth checking out whether these trends will continue.
If you want to know more about Sunex, we have spotted 4 warning signs, and 2 of them are a bit disturbing.
If you want to look for solid businesses with great income, check out this free list of companies with good balance sheets and impressive returns on equity.
This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
Do you have any feedback on this item? Are you worried about the content? Get in touch with us directly. You can also send an email to the editorial team (at) simplywallst.com.