Under The Bonnet, Jiangsu Bojun Industrial Technology's (SZSE:300926) Returns Look Impressive

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Jiangsu Bojun Industrial Technology's (SZSE:300926) returns on capital, so let's have a look.

Understanding 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. To calculate this metric for Jiangsu Bojun Industrial Technology, this is the formula:

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

0.23 = CN¥596m ÷ (CN¥5.3b - CN¥2.7b) (Based on the trailing twelve months to June 2024).

So, Jiangsu Bojun Industrial Technology has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Auto Components industry average of 7.2%.

See our latest analysis for Jiangsu Bojun Industrial Technology

Above you can see how the current ROCE for Jiangsu Bojun Industrial Technology 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 Jiangsu Bojun Industrial Technology for free.

How Are Returns Trending?

Jiangsu Bojun Industrial Technology is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 23%. 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 427%. So we're very much inspired by what we're seeing at Jiangsu Bojun Industrial Technology thanks to its ability to profitably reinvest capital.

Another thing to note, Jiangsu Bojun Industrial Technology has a high ratio of current liabilities to total assets of 50%. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Bottom Line

All in all, it's terrific to see that Jiangsu Bojun Industrial Technology is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 164% to shareholders over the last three years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Jiangsu Bojun Industrial Technology does have some risks though, and we've spotted 2 warning signs for Jiangsu Bojun Industrial Technology that you might be interested in.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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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.