Hunan Boyun New MaterialsLtd (SZSE:002297) Might Have The Makings Of A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Hunan Boyun New MaterialsLtd (SZSE:002297) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Hunan Boyun New MaterialsLtd:

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

0.0032 = CN¥7.4m ÷ (CN¥2.9b - CN¥623m) (Based on the trailing twelve months to March 2024).

Therefore, Hunan Boyun New MaterialsLtd has an ROCE of 0.3%. In absolute terms, that's a low return and it also under-performs the Aerospace & Defense industry average of 4.3%.

See our latest analysis for Hunan Boyun New MaterialsLtd

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Hunan Boyun New MaterialsLtd has performed in the past in other metrics, you can view this free graph of Hunan Boyun New MaterialsLtd's past earnings, revenue and cash flow.

What Does the ROCE Trend For Hunan Boyun New MaterialsLtd Tell Us?

Hunan Boyun New MaterialsLtd has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 0.3% which is a sight for sore eyes. Not only that, but the company is utilizing 36% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From Hunan Boyun New MaterialsLtd's ROCE

Long story short, we're delighted to see that Hunan Boyun New MaterialsLtd's reinvestment activities have paid off and the company is now profitable. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know about the risks facing Hunan Boyun New MaterialsLtd, we've discovered 2 warning signs that you should be aware of.

While Hunan Boyun New MaterialsLtd 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.

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