There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. Speaking of which, we noticed some great changes in Wus Printed Circuit (Kunshan)'s (SZSE:002463) returns on capital, so let's have a look.
What Is Return On Capital Employed (ROCE)?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Wus Printed Circuit (Kunshan) is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.15 = CN¥1.6b ÷ (CN¥15b - CN¥4.4b) (Based on the trailing twelve months to September 2023).
Therefore, Wus Printed Circuit (Kunshan) has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 5.0% generated by the Electronic industry.
Check out our latest analysis for Wus Printed Circuit (Kunshan)
Above you can see how the current ROCE for Wus Printed Circuit (Kunshan) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Wus Printed Circuit (Kunshan).
The Trend Of ROCE
Investors would be pleased with what's happening at Wus Printed Circuit (Kunshan). The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 136%. So we're very much inspired by what we're seeing at Wus Printed Circuit (Kunshan) thanks to its ability to profitably reinvest capital.
Our Take On Wus Printed Circuit (Kunshan)'s ROCE
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Wus Printed Circuit (Kunshan) has. And a remarkable 241% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.
One more thing, we've spotted 2 warning signs facing Wus Printed Circuit (Kunshan) that you might find interesting.
While Wus Printed Circuit (Kunshan) 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.