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- SZSE:000887
Anhui Zhongding Sealing Parts (SZSE:000887) Is Doing The Right Things To Multiply Its Share Price
Did you know there are some financial metrics that can provide clues of a potential 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Anhui Zhongding Sealing Parts (SZSE:000887) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What Is It?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Anhui Zhongding Sealing Parts:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = CN¥1.7b ÷ (CN¥24b - CN¥7.8b) (Based on the trailing twelve months to September 2024).
Therefore, Anhui Zhongding Sealing Parts has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Auto Components industry average of 7.0% it's much better.
View our latest analysis for Anhui Zhongding Sealing Parts
Above you can see how the current ROCE for Anhui Zhongding Sealing Parts compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Anhui Zhongding Sealing Parts for free.
How Are Returns Trending?
Anhui Zhongding Sealing Parts is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 11%. The amount of capital employed has increased too, by 28%. So we're very much inspired by what we're seeing at Anhui Zhongding Sealing Parts thanks to its ability to profitably reinvest capital.
The Bottom Line
In summary, it's great to see that Anhui Zhongding Sealing Parts can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
If you'd like to know about the risks facing Anhui Zhongding Sealing Parts, we've discovered 1 warning sign that you should be aware of.
While Anhui Zhongding Sealing Parts isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
About SZSE:000887
Anhui Zhongding Sealing Parts
Manufactures and sells hydraulic and pneumatic seals, and non-tire rubber products in China.
Flawless balance sheet, undervalued and pays a dividend.