Returns At Wuxi HyatechLtd (SHSE:688510) Appear To Be Weighed Down

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Wuxi HyatechLtd's (SHSE:688510) ROCE trend, we were pretty happy with 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 Wuxi HyatechLtd is:

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

0.11 = CN¥136m ÷ (CN¥1.8b - CN¥602m) (Based on the trailing twelve months to December 2024).

So, Wuxi HyatechLtd has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 4.4% generated by the Aerospace & Defense industry.

See our latest analysis for Wuxi HyatechLtd

Above you can see how the current ROCE for Wuxi HyatechLtd 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 Wuxi HyatechLtd .

What Does the ROCE Trend For Wuxi HyatechLtd Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 187% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Wuxi HyatechLtd has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

In Conclusion...

In the end, Wuxi HyatechLtd has proven its ability to adequately reinvest capital at good rates of return. Yet over the last three years the stock has declined 31%, 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.

If you'd like to know about the risks facing Wuxi HyatechLtd, we've discovered 1 warning sign that you should be aware of.

While Wuxi HyatechLtd 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.