Returns Are Gaining Momentum At Landai Technology Group (SZSE:002765)

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Landai Technology Group (SZSE:002765) 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. The formula for this calculation on Landai Technology Group is:

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

0.00074 = CN¥2.6m ÷ (CN¥5.4b - CN¥1.9b) (Based on the trailing twelve months to September 2024).

Therefore, Landai Technology Group has an ROCE of 0.07%. Ultimately, that's a low return and it under-performs the Auto Components industry average of 7.1%.

Check out our latest analysis for Landai Technology Group

Above you can see how the current ROCE for Landai Technology Group 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 Landai Technology Group .

The Trend Of ROCE

We're delighted to see that Landai Technology Group is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 0.07% which is a sight for sore eyes. Not only that, but the company is utilizing 45% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Our Take On Landai Technology Group's ROCE

In summary, it's great to see that Landai Technology Group has managed to break into profitability and is continuing to reinvest in its business. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Landai Technology Group can keep these trends up, it could have a bright future ahead.

Like most companies, Landai Technology Group does come with some risks, and we've found 1 warning sign that you should be aware of.

While Landai Technology Group 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.