What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. And in light of that, the trends we're seeing at Tecnoglass' (NYSE:TGLS) look very promising so lets take a look.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Tecnoglass:

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

0.30 = US$227m ÷ (US$1.0b - US$266m) (Based on the trailing twelve months to December 2024).

Thus, Tecnoglass has an ROCE of 30%.  In absolute terms that's a great return and it's even better than the Building industry average of 15%.

View our latest analysis for Tecnoglass NYSE:TGLS Return on Capital Employed May 5th 2025

In the above chart we have measured Tecnoglass' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our freeanalyst report for Tecnoglass .

What Does the ROCE Trend For Tecnoglass Tell Us?

We like the trends that we're seeing from Tecnoglass. Over the last five years, returns on capital employed have risen substantially to 30%. Basically the business is earning more per dollar of capital invested and in addition to that, 70% more capital is being employed now too. So we're very much inspired by what we're seeing at Tecnoglass thanks to its ability to profitably reinvest capital.

The Key Takeaway

To sum it up, Tecnoglass has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 1,797% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Tecnoglass can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for TGLS on our platform that is definitely worth checking out.

Story Continues

Tecnoglass is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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