To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Alibaba Pictures Group's (HKG:1060) returns on capital, so let's have a look.
Return On Capital Employed (ROCE): What Is It?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Alibaba Pictures Group is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.031 = CN¥460m ÷ (CN¥18b - CN¥2.8b) (Based on the trailing twelve months to September 2023).
So, Alibaba Pictures Group has an ROCE of 3.1%. Ultimately, that's a low return and it under-performs the Entertainment industry average of 6.2%.
In the above chart we have measured Alibaba Pictures Group's 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 free analyst report for Alibaba Pictures Group .
What The Trend Of ROCE Can Tell Us
Shareholders will be relieved that Alibaba Pictures Group has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 3.1%, which is always encouraging. While returns have increased, the amount of capital employed by Alibaba Pictures Group has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.
The Bottom Line
As discussed above, Alibaba Pictures Group appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. However the stock is down a substantial 71% in the last five years so there could be other areas of the business hurting its prospects. Still, it's worth doing some further research to see if the trends will continue into the future.
If you want to continue researching Alibaba Pictures Group, you might be interested to know about the 2 warning signs that our analysis has discovered.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.
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モノリシックパワーシステムズのような株を見つけるために、ビジネスにおいて求めるべき基本的なトレンドとは何でしょうか? その他のことに加えて、2つのことを見たいと思うでしょう。まず第一に、成長していることです。資本利回り (ROCE)とは何ですか?わからない方には、ROCEは企業が事業に使用する資本から、税引き前利益をどれだけ生成できるかを測定します。アナリストは以下の式を使用して、Bumi Armada BerhadのROCEを計算します。「ROCE = 利息や税金を除いた利益 (EBIT) ÷ (総資産 - 流動負債)」。ROCEが成長するのは、事業に投下される資本が成長していることを意味し、Coupangが投下資本の拡大に取り組んでいることを示しています。Bumi Armada Berhadが前のROCEと前のパフォーマンスを比較した上図では、将来のROCEがより重要であるとされています。もし興味がある場合は、Bumi Armada Berhadの無料アナリストレポートをご覧いただけます。使用された資本の回収率です。基本的に、企業が継続的に再投資できる収益性の高いイニシアチブを持っていることを意味し、これは複利の機械の特徴です。ところで、アリババグループホールディングの資本回収率に大きな変化があることに気づきましたので、見てみましょう。