The Return Trends At Xuzhou Handler Special Vehicle (SZSE:300201) Look Promising

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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 on that note, Xuzhou Handler Special Vehicle (SZSE:300201) looks quite promising in regards to its trends of return on capital.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Xuzhou Handler Special Vehicle:

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

0.12 = CN¥173m ÷ (CN¥2.4b - CN¥959m) (Based on the trailing twelve months to September 2023).

So, Xuzhou Handler Special Vehicle has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 6.1% it's much better.

Check out our latest analysis for Xuzhou Handler Special Vehicle

Above you can see how the current ROCE for Xuzhou Handler Special Vehicle 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 Xuzhou Handler Special Vehicle .

So How Is Xuzhou Handler Special Vehicle's ROCE Trending?

Xuzhou Handler Special Vehicle has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 25% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Xuzhou Handler Special Vehicle's ROCE

In summary, we're delighted to see that Xuzhou Handler Special Vehicle has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 21% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

While Xuzhou Handler Special Vehicle looks impressive, no company is worth an infinite price. The intrinsic value infographic for 300201 helps visualize whether it is currently trading for a fair price.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.