Return Trends At Chongqing Wangbian Electric (Group) (SHSE:603191) Aren't Appealing

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 ran our eye over Chongqing Wangbian Electric (Group)'s (SHSE:603191) trend of ROCE, we liked what we saw.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Chongqing Wangbian Electric (Group) is:

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

0.10 = CN¥318m ÷ (CN¥4.5b - CN¥1.4b) (Based on the trailing twelve months to September 2023).

So, Chongqing Wangbian Electric (Group) has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Electrical industry average of 6.4% it's much better.

View our latest analysis for Chongqing Wangbian Electric (Group)

In the above chart we have measured Chongqing Wangbian Electric (Group)'s prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Chongqing Wangbian Electric (Group) for free.

How Are Returns Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 10% and the business has deployed 266% more capital into its operations. 10% is a pretty standard return, and it provides some comfort knowing that Chongqing Wangbian Electric (Group) has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Chongqing Wangbian Electric (Group)'s ROCE

To sum it up, Chongqing Wangbian Electric (Group) has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last year the stock has declined 30%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

On a final note, we found 2 warning signs for Chongqing Wangbian Electric (Group) (1 is concerning) you should be aware of.

While Chongqing Wangbian Electric (Group) 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.