If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. Although, when we looked at China Railway Construction Heavy Industry (SHSE:688425), it didn't seem to tick all of these boxes.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for China Railway Construction Heavy Industry, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = CN¥1.7b ÷ (CN¥24b - CN¥7.8b) (Based on the trailing twelve months to March 2022).
So, China Railway Construction Heavy Industry has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 7.5% it's much better.
View our latest analysis for China Railway Construction Heavy Industry
SHSE:688425 Return on Capital Employed July 24th 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're interested in investigating China Railway Construction Heavy Industry's past further, check out this free graph of past earnings, revenue and cash flow.
The Trend Of ROCE
In terms of China Railway Construction Heavy Industry's historical ROCE movements, the trend isn't fantastic. Over the last four years, returns on capital have decreased to 11% from 16% four years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.
On a side note, China Railway Construction Heavy Industry has done well to pay down its current liabilities to 33% of total assets. That could partly explain why the ROCE has dropped. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.
In Conclusion...
While returns have fallen for China Railway Construction Heavy Industry in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These growth trends haven't led to growth returns though, since the stock has fallen 23% over the last year. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.
China Railway Construction Heavy Industry does have some risks, we noticed 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.
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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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.
如果你不確定在尋找下一個多袋子時從哪裏開始,有幾個關鍵的趨勢你應該密切關注。一種常見的方法是嘗試找到一家擁有退貨已使用資本(ROCE)正在增加,同時也在增長金額已動用資本的比例。如果你看到這個,通常意味着它是一家擁有出色商業模式和大量有利可圖的再投資機會的公司。雖然,當我們看到中國鐵建重工(上海證券交易所:688425),它似乎沒有勾選所有這些框。
瞭解資本回報率(ROCE)
對於那些不確定ROCE是什麼的人,它衡量的是一家公司可以從其業務中使用的資本產生的税前利潤。要計算中國鐵建重工的這一指標,公式如下:
已動用資本回報率=息税前收益(EBIT)?(總資產-流動負債)
0.11=CN元17億?(CN元240億-CN元78億)(根據截至2022年3月的往績12個月計算).
所以,中國鐵建重工的淨資產收益率為11%。就絕對值而言,這是一個令人滿意的回報率,但與機械行業7.5%的平均回報率相比,這要好得多。
查看我們對中國鐵建重工的最新分析
上證綜指:2022年7月24日資本回報率688425
雖然過去並不代表未來,但瞭解一家公司歷史上的表現是有幫助的,這就是為什麼我們有上面的圖表。如果你有興趣進一步調查中國鐵建重工的過去,請查看以下內容免費過去收益、收入和現金流的圖表。
ROCE的發展趨勢
就中國鐵建重工歷史上的ROCE運動而言,這一趨勢並不美妙。過去四年,資本回報率從四年前的16%降至11%。然而,鑑於已動用資本和收入都有所增加,該業務目前似乎正在追求增長,這是短期回報的結果。如果增加的資本產生額外的回報,從長遠來看,企業和股東都將受益。
另外,中國鐵建重工在償還當前負債佔總資產的33%方面做得很好。這可能在一定程度上解釋了ROCE下降的原因。實際上,這意味着它們的供應商或短期債權人減少了對業務的融資,這降低了一些風險因素。一些人會説,這降低了企業產生淨資產收益率的效率,因為它現在用自己的錢為更多的運營提供資金。
總之..。
雖然近期中國鐵建重工的回報率有所下降,但令我們感到鼓舞的是,銷售額在增長,該業務正在對其業務進行再投資。不過,這些增長趨勢並沒有帶來增長回報,因為該公司股價在過去一年裏下跌了23%。因此,我們建議進一步研究這隻股票,以揭示該業務的其他基本面可以向我們展示什麼。
我們注意到,中國鐵建重工確實存在一些風險2個警告標誌(和1,這有點不愉快)我們認為你應該知道。
如果你想尋找收入豐厚的可靠公司,看看這個免費擁有良好資產負債表和可觀股本回報率的公司名單。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。