Investors Will Want Tiandi Science & TechnologyLtd's (SHSE:600582) Growth In ROCE To Persist

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 when we looked at Tiandi Science & TechnologyLtd (SHSE:600582) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for Tiandi Science & TechnologyLtd, this is the formula:

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

0.10 = CN¥3.4b ÷ (CN¥53b - CN¥21b) (Based on the trailing twelve months to September 2024).

Therefore, Tiandi Science & TechnologyLtd has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 5.2% it's much better.

Check out our latest analysis for Tiandi Science & TechnologyLtd

Above you can see how the current ROCE for Tiandi Science & TechnologyLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Tiandi Science & TechnologyLtd .

So How Is Tiandi Science & TechnologyLtd's ROCE Trending?

Tiandi Science & TechnologyLtd is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. The amount of capital employed has increased too, by 35%. So we're very much inspired by what we're seeing at Tiandi Science & TechnologyLtd thanks to its ability to profitably reinvest capital.

Our Take On Tiandi Science & TechnologyLtd's ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Tiandi Science & TechnologyLtd has. And a remarkable 116% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 1 warning sign facing Tiandi Science & TechnologyLtd that you might find interesting.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.