AP Memory Technology (TWSE:6531) has Capital Gains

To find more stock-baggers, which of the following should we look for in a business? First, we want to know how it is growing come back on capital employed (ROCE) and besides, it is increasing the foundation of money spent. Essentially this means that the company has profitable ventures that it can continue to invest in, which is characteristic of a conglomerate. So let’s look AP memory technology (TWSE: 6531) and its ROCE trend, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those who don’t know, ROCE is a measure of a company’s annual profit before tax (its return), relative to the capital employed in the business. The formula for these calculations in AP Memory Technology is:

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

0.079 = NT$878m ÷ (NT$13b – NT$2.1b) (Based on the next twelve months to June 2024).

Therefore, AP Memory Technology has a ROCE of 7.9%. In itself, it is a low number but close to the 8.8% average produced by the Semiconductor industry.

Check out our latest review for AP Memory Technology

In the chart above we have measured AP Memory Technology’s ROCE against its past performance, but the future is more important. If you’d like, you can check out predictions from analysts covering AP Memory Technology for for free.

How Are Funds Delivered?

We are pleased to see that AP Memory Technology is reaping dividends from its investment and is now generating some profit before tax. The company was generating losses for the past five years, but now it is earning 7.9% which is a sight for sore eyes. In addition, AP Memory Technology is spending 378% more than previously expected for a company trying to make a profit. This can indicate that there are more opportunities to invest in and at the highest prices, which are common characteristics of many wallets.

On a related note, the company’s debt-to-equity ratio has dropped to 16%, reducing its cash flow from borrowers or short-term sellers. So this improvement in ROCE comes from the underlying economics of the business, which is nice to see.

We take our ROCE for AP Memory Technology

To the delight of many shareholders, AP Memory Technology is now profitable. And since the stock has performed so well over the past five years, these trends are being reported by investors. That being said, we still think the promising fundamentals mean the company deserves another round.

If you want to know about the risks facing AP Memory Technology, we’ve got you covered 3 warning signs what you should be aware of.

For those who like to invest in solid companies, check this out for free list of companies with solid balance sheets and high return on equity.

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This Simply Wall St article is general in nature. We provide opinions based on historical data and analyst estimates using an unbiased approach and our articles are not intended as financial advice. It does not make an offer to buy or sell any property, and does not consider your motives, or your financial situation. We are committed to bringing you long-term analysis focused on fundamentals. Note that our review may not include recent company announcements that are not sensitive to pricing or quality equipment. Simply Wall St has no position in the stocks mentioned.