# Capital Allocation Trends At Sobute New Materials (SHSE:603916) Aren't Ideal

Simply Wall St ·  08/14 18:07

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Sobute New Materials (SHSE:603916), we don't think it's current trends fit the mold of a multi-bagger.

## 資本僱用回報率（ROCE）是什麼？

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. Analysts use this formula to calculate it for Sobute New Materials:

ROCE是衡量一家公司一年稅前利潤（回報）與投入資本的相對關係的指標。分析師使用以下公式來計算蘇博特的ROCE：

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.048 = CN¥285m ÷ (CN¥7.9b - CN¥2.0b) (Based on the trailing twelve months to March 2024).

0.048 = 2.85億人民幣 ÷ （79億人民幣 - 2.0億人民幣）（基於過去12個月至2024年3月）。

So, Sobute New Materials has an ROCE of 4.8%. On its own, that's a low figure but it's around the 5.5% average generated by the Chemicals industry.

In the above chart we have measured Sobute New Materials' 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 Sobute New Materials .

## 儘管如此，當我們看 enphase energy (納斯達克股票代碼：ENPH) 的時候，它似乎並沒有完全符合這些要求。

In terms of Sobute New Materials' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 12% 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 may take some time before the company starts to see any change in earnings from these investments.

On a side note, Sobute New Materials has done well to pay down its current liabilities to 26% of total assets. That could partly explain why the ROCE has dropped. 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.

## 最後，同等資本下回報率較低的趨勢通常不是我們關注創業板股票的最佳信號。由於這些發展進行良好，因此投資者不太可能表現友好。自五年前以來，該股下跌了32%。除非這些指標朝着更積極的軌跡轉變，否則我們將繼續尋找其他股票。

In summary, Sobute New Materials is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 17% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a separate note, we've found 3 warning signs for Sobute New Materials you'll probably want to 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.