What trends should we look for it we want to identify stocks that can 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at YTO Express GroupLtd's (SHSE:600233) ROCE trend, we were pretty happy with what we saw.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for YTO Express GroupLtd, this is the formula:

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

0.16 = CN¥4.8b ÷ (CN¥41b - CN¥11b) (Based on the trailing twelve months to September 2023).

Thus, YTO Express GroupLtd has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Logistics industry average of 7.1% it's much better.

Above you can see how the current ROCE for YTO Express GroupLtd 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 analyst report for YTO Express GroupLtd .

What Can We Tell From YTO Express GroupLtd's ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has employed 176% more capital in the last five years, and the returns on that capital have remained stable at 16%. Since 16% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

What We Can Learn From YTO Express GroupLtd's ROCE

To sum it up, YTO Express GroupLtd has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 27% return to shareholders who held over that period. That's why it could be worth your time looking into this stock further to discover if it has more traits of a multi-bagger.

YTO Express GroupLtd does have some risks though, and we've spotted 1 warning sign for YTO Express GroupLtd that you might be interested in.

While YTO Express GroupLtd 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.