There's Been No Shortage Of Growth Recently For Ningbo Sanxing Medical ElectricLtd's (SHSE:601567) Returns On Capital

Simply Wall St · 10/17 01:58

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Ningbo Sanxing Medical ElectricLtd's (SHSE:601567) 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. To calculate this metric for Ningbo Sanxing Medical ElectricLtd, this is the formula:

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

0.16 = CN¥2.0b ÷ (CN¥20b - CN¥7.2b) (Based on the trailing twelve months to June 2024).

So, Ningbo Sanxing Medical ElectricLtd has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 5.9% generated by the Electrical industry.

Check out our latest analysis for Ningbo Sanxing Medical ElectricLtd

roce
SHSE:601567 Return on Capital Employed October 17th 2024

Above you can see how the current ROCE for Ningbo Sanxing Medical ElectricLtd 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 Ningbo Sanxing Medical ElectricLtd .

What The Trend Of ROCE Can Tell Us

We like the trends that we're seeing from Ningbo Sanxing Medical ElectricLtd. Over the last five years, returns on capital employed have risen substantially to 16%. The amount of capital employed has increased too, by 40%. So we're very much inspired by what we're seeing at Ningbo Sanxing Medical ElectricLtd thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Ningbo Sanxing Medical ElectricLtd is reaping the rewards from prior investments and is growing its capital base. And a remarkable 433% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Ningbo Sanxing Medical ElectricLtd can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Ningbo Sanxing Medical ElectricLtd, we've discovered 1 warning sign that you should be aware of.

While Ningbo Sanxing Medical ElectricLtd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.