Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Shanxi Huaxiang Group (SHSE:603112) and its ROCE trend, we weren't exactly thrilled.
What Is Return On Capital Employed (ROCE)?
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 Shanxi Huaxiang Group:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.076 = CN¥283m ÷ (CN¥5.1b - CN¥1.4b) (Based on the trailing twelve months to September 2022).
Thus, Shanxi Huaxiang Group has an ROCE of 7.6%. In absolute terms, that's a low return but it's around the Machinery industry average of 6.6%.
See our latest analysis for Shanxi Huaxiang Group
SHSE:603112 Return on Capital Employed December 14th 2022
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'd like to look at how Shanxi Huaxiang Group has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
What The Trend Of ROCE Can Tell Us
On the surface, the trend of ROCE at Shanxi Huaxiang Group doesn't inspire confidence. To be more specific, ROCE has fallen from 13% over the last five years. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.
On a related note, Shanxi Huaxiang Group has decreased its current liabilities to 27% of total assets. So we could link some of this to the decrease in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.
Our Take On Shanxi Huaxiang Group's ROCE
In summary, Shanxi Huaxiang Group is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Additionally, the stock's total return to shareholders over the last year has been flat, which isn't too surprising. Therefore based on the analysis done in this article, we don't think Shanxi Huaxiang Group has the makings of a multi-bagger.
If you want to know some of the risks facing Shanxi Huaxiang Group we've found 2 warning signs (1 is potentially serious!) that you should be aware of before investing here.
While Shanxi Huaxiang Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
找到一家具有大幅增长潜力的企业并非易事,但如果我们看看几个关键的财务指标,这是可能的。在其他方面,我们希望看到两件事;第一,不断增长的退货一是关于已用资本(ROCE),二是公司的金额已动用资本的比例。归根结底,这表明它是一家正在以越来越高的回报率对利润进行再投资的企业。有鉴于此,当我们看到山西华翔集团(上海证券交易所:603112)和它的ROCE趋势,我们并不是很兴奋。
什么是资本回报率(ROCE)?
如果你以前没有使用过ROCE,它衡量的是一家公司从业务资本中获得的“回报”(税前利润)。分析师用以下公式计算山西华翔集团的股价:
已动用资本回报率=息税前收益(EBIT)?(总资产-流动负债)
0.076=人民币2.83亿?(人民币51亿元-人民币14亿元)(基于截至2022年9月的过去12个月).
因此,山西华翔集团的净资产收益率为7.6%。按绝对值计算,这是一个较低的回报率,但约为机械行业6.6%的平均水平。
查看我们对山西华翔集团的最新分析
上证所:2022年12月14日603112的资本回报率
虽然过去并不代表未来,但了解一家公司历史上的表现是有帮助的,这就是为什么我们有上面的图表。如果你想看看山西华翔集团过去在其他指标上的表现,你可以查看以下内容免费过去收益、收入和现金流的图表。
ROCE的走势告诉我们什么
从表面上看,山西华翔集团的ROCE走势并没有激发信心。更具体地说,ROCE在过去五年中从13%下降。另一方面,该公司一直在使用更多的资本,但去年的销售额没有相应的改善,这可能表明这些投资是更长期的投资。从现在开始,值得密切关注该公司的收益,看看这些投资最终是否真的为利润做出了贡献。
与此相关的是,山西华翔集团已将流动负债降至总资产的27%。因此,我们可以将其中一些因素与净资产收益率的下降联系起来。更重要的是,这可以降低业务的某些方面的风险,因为现在该公司的供应商或短期债权人为其运营提供的资金减少了。一些人会说,这降低了企业产生净资产收益率的效率,因为它现在用自己的钱为更多的运营提供资金。
我们对山西华翔集团ROCE的看法
总而言之,山西华翔集团正在将资金重新投资到业务中,以求增长,但不幸的是,销售额看起来还没有太大增长。此外,该股去年给股东带来的总回报持平,这并不太令人意外。因此,根据本文的分析,我们认为山西华翔集团不具备多套袋的条件。
如果你想知道山西华翔集团面临的一些风险,我们已经找到了2个警告标志(%1可能很严重!)在这里投资之前你应该意识到这一点。
尽管山西华翔集团的回报率并不是最高的,但看看这个免费资产负债表稳健、股本回报率高的公司名单。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。