If you’re looking for a multi-bagger, there’s a few things to keep an eye out for. Typically, we’ll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in JiaoZuo WanFang Aluminum Manufacturing’s (SZSE:000612) returns on capital, so let’s have a look.
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 JiaoZuo WanFang Aluminum Manufacturing:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.00023 = CN¥1.4m ÷ (CN¥8.2b – CN¥2.1b) (Based on the trailing twelve months to September 2023).
Thus, JiaoZuo WanFang Aluminum Manufacturing has an ROCE of 0.02%. Ultimately, that’s a low return and it under-performs the Metals and Mining industry average of 6.4%.
View our latest analysis for JiaoZuo WanFang Aluminum Manufacturing
SZSE:000612 Return on Capital Employed March 12th 2024
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you’re interested in investigating JiaoZuo WanFang Aluminum Manufacturing’s past further, check out this free graph covering JiaoZuo WanFang Aluminum Manufacturing’s past earnings, revenue and cash flow.
What Can We Tell From JiaoZuo WanFang Aluminum Manufacturing’s ROCE Trend?
Shareholders will be relieved that JiaoZuo WanFang Aluminum Manufacturing has broken into profitability. The company now earns 0.02% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by JiaoZuo WanFang Aluminum Manufacturing has remained flat over the period. With no noticeable increase in capital employed, it’s worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. So if you’re looking for high growth, you’ll want to see a business’s capital employed also increasing.
Our Take On JiaoZuo WanFang Aluminum Manufacturing’s ROCE
As discussed above, JiaoZuo WanFang Aluminum Manufacturing appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has only returned 4.4% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. Given that, we’d look further into this stock in case it has more traits that could make it multiply in the long term.
On a final note, we’ve found 2 warning signs for JiaoZuo WanFang Aluminum Manufacturing that we think you should be aware of.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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Find out whether JiaoZuo WanFang Aluminum Manufacturing is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.
