Under The Bonnet, X-Legend Entertainment’s (TWSE:4994) return looks impressive

If you are looking for a multi-bagger, there are a few things you should pay attention to. Among other things, we want to see two things; firstly, a growing one return on the capital employed (ROCE) and secondly an expansion of the company’s success Crowd of the capital employed. When you see this, it usually means it’s a company with a great business model and plenty of profitable reinvestment opportunities. And it is against this backdrop that we see the trends we are currently seeing X-Legend Entertainments (TWSE:4994) look very promising, so let’s take a look.

What is Return on Capital Employed (ROCE)?

If you’ve never worked with ROCE before, it measures the “return” (profit before taxes) that a company generates from the capital employed in its business. The formula for this calculation at X-Legend Entertainment is:

Return on capital employed = Earnings before interest and taxes (EBIT) ÷ (total assets – current liabilities)

0.21 = NT$225 million ÷ (NT$1.5 billion – NT$403 million) (Based on the last twelve months ended June 2024).

Therefore, X-Legend Entertainment has an ROCE of 21%. In absolute terms, that’s a great return, even better than the entertainment industry average of 9.7%.

Check out our latest analysis for X-Legend Entertainment

Even if the past is not representative of the future, it can be helpful to know how a company has performed in the past. That’s why we have this chart above. If you want to look at historical returns, check these out free Charts detailing X-Legend Entertainment’s revenue and cash flow performance.

What does the ROCE trend tell us for X-Legend Entertainment?

X-Legend Entertainment is promising as ROCE tends to trend up and to the right. A look at the data shows that the ROCE generated has increased by 70% over the last five years, even though the capital employed in the company has remained relatively constant. Therefore, it is likely that the company is now reaping the full benefits of its previous investments since the capital employed has not changed significantly. Things are looking good in this regard, so it’s worth examining what management has said about its growth plans going forward.

Finally…

As explained above, X-Legend Entertainment appears to be becoming more and more powerful at generating returns, as capital employed has remained the same but profit (before interest and taxes) has increased. And with the stock down 16% over the last five years, there could be an opportunity here. Against this background, an examination of the company’s current valuation metrics and future prospects seems appropriate.

Finally, we found: 2 warning signs for X-Legend Entertainment We think you should be aware of this.

If you want to see other companies that deliver high returns, check out ours free Here you will find a list of companies with high returns and solid balance sheets.

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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not reflect the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any stocks mentioned.