We Like These Underlying Return On Capital Trends At RoboTechnik Intelligent Technology (SZSE:300757)

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. With that in mind, we've noticed some promising trends at RoboTechnik Intelligent Technology (SZSE:300757) so let's look a bit deeper.

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. The formula for this calculation on RoboTechnik Intelligent Technology is:

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

0.15 = CN¥162m ÷ (CN¥2.4b - CN¥1.3b) (Based on the trailing twelve months to September 2024).

So, RoboTechnik Intelligent Technology has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 5.3% it's much better.

Check out our latest analysis for RoboTechnik Intelligent Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for RoboTechnik Intelligent Technology's ROCE against it's prior returns. If you're interested in investigating RoboTechnik Intelligent Technology's past further, check out this free graph covering RoboTechnik Intelligent Technology's past earnings, revenue and cash flow.

What Does the ROCE Trend For RoboTechnik Intelligent Technology Tell Us?

RoboTechnik Intelligent Technology is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 53%. So we're very much inspired by what we're seeing at RoboTechnik Intelligent Technology thanks to its ability to profitably reinvest capital.

On a side note, RoboTechnik Intelligent Technology's current liabilities are still rather high at 55% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

What We Can Learn From RoboTechnik Intelligent Technology'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 RoboTechnik Intelligent Technology has. Since the stock has returned a staggering 581% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

RoboTechnik Intelligent Technology does have some risks though, and we've spotted 3 warning signs for RoboTechnik Intelligent Technology that you might be interested in.

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.