What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Jiangxi Hungpai New Material (SHSE:605366) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
Understanding 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. The formula for this calculation on Jiangxi Hungpai New Material is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.19 = CN¥420m ÷ (CN¥2.9b - CN¥654m) (Based on the trailing twelve months to September 2022).
So, Jiangxi Hungpai New Material has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Chemicals industry average of 8.9% it's much better.
View our latest analysis for Jiangxi Hungpai New Material
SHSE:605366 Return on Capital Employed December 23rd 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 Jiangxi Hungpai New Material's past further, check out this free graph of past earnings, revenue and cash flow.
What Does the ROCE Trend For Jiangxi Hungpai New Material Tell Us?
When we looked at the ROCE trend at Jiangxi Hungpai New Material, we didn't gain much confidence. Around five years ago the returns on capital were 24%, but since then they've fallen to 19%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.
On a side note, Jiangxi Hungpai New Material has done well to pay down its current liabilities to 22% 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.
The Bottom Line On Jiangxi Hungpai New Material's ROCE
While returns have fallen for Jiangxi Hungpai New Material in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And the stock has followed suit returning a meaningful 49% to shareholders over the last year. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further.
One final note, you should learn about the 2 warning signs we've spotted with Jiangxi Hungpai New Material (including 1 which is concerning) .
While Jiangxi Hungpai New Material may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
我們應該尋找哪些早期趨勢來識別一隻可能在長期內成倍增值的股票?在一個完美的世界裡,我們希望看到一家公司向其業務投入更多資本,理想情況下,從這些資本中賺取的回報也在增加。基本上,這意味著一家公司有盈利的舉措,可以繼續進行再投資,這是復合機器的一個特點。然而,在簡單地看了一下數位之後,我們認為江西紅牌新材料(上海證券交易所:605366)未來有可能成為一個多袋子的人,但讓我們看看為什麼會這樣。
瞭解資本回報率(ROCE)
如果你以前沒有使用過ROCE,它衡量的是一家公司從業務資本中獲得的“回報”(稅前利潤)。江西紅牌新材料的計算公式為:
已動用資本回報率=息稅前收益(EBIT)?(總資產-流動負債)
0.19=CN元4.2億?(CN元29億元-CN元6.54億元)(基於截至2022年9月的過去12個月).
所以,江西宏派新材料ROCE為19%。就絕對值而言,這是一個令人滿意的回報率,但與化工行業8.9%的平均回報率相比,這要好得多。
查看我們對江西紅牌新材料的最新分析
上證所:2022年12月23日資本回報率605366
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江西紅牌新材料的過去,請查看以下內容免費過去收益、收入和現金流的圖表。
江西紅牌新材料的ROCE趨勢告訴我們什麼?
當我們看著江西宏派新材料的ROCE趨勢時,我們並沒有獲得太多的信心。大約五年前,資本回報率為24%,但自那以來已降至19%。儘管,考慮到收入和業務中使用的資產數量都有所增加,這可能表明該公司正在投資於增長,而額外的資本導致了ROCE的短期下降。如果這些投資被證明是成功的,這可能是長期股票表現的好兆頭。
另外,江西宏派新材料在償還當前負債佔總資產的22%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,這意味著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。一些人會說,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。
江西紅牌新材料ROCE的底線
雖然最近江西宏派新材料的回報率有所下降,但我們看到銷售額在增長,該業務正在對其業務進行再投資,這讓我們感到鼓舞。過去一年,該股也向股東返還了49%的高額回報。因此,雖然潛在的趨勢可能已經被投資者所解釋,但我們仍然認為這只股票值得進一步研究。
最後一個注意事項,您應該瞭解2個警告標誌我們已經發現了江西紅牌新材料(包括1個相關的)。
雖然江西紅牌新材料目前的回報率可能不是最高的,但我們已經編制了一份股本回報率超過25%的公司名單。看看這個免費在這裡列出。
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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。