SF Oilless Bearing Group (SZSE:300817) Will Want To Turn Around Its Return Trends

There are a few key trends to look for if we want to identify the next multi-bagger. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at SF Oilless Bearing Group (SZSE:300817) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What Is Return On Capital Employed (ROCE)?

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 SF Oilless Bearing Group is:

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

0.061 = CN¥67m ÷ (CN¥1.3b - CN¥197m) (Based on the trailing twelve months to March 2024).

So, SF Oilless Bearing Group has an ROCE of 6.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.6%.

View our latest analysis for SF Oilless Bearing Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for SF Oilless Bearing Group's ROCE against it's prior returns. If you'd like to look at how SF Oilless Bearing Group has performed in the past in other metrics, you can view this free graph of SF Oilless Bearing Group's past earnings, revenue and cash flow.

So How Is SF Oilless Bearing Group's ROCE Trending?

In terms of SF Oilless Bearing Group's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 6.1% from 17% five years ago. However it looks like SF Oilless Bearing Group might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line

To conclude, we've found that SF Oilless Bearing Group is reinvesting in the business, but returns have been falling. And in the last three years, the stock has given away 19% so the market doesn't look too hopeful on these trends strengthening any time soon. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with SF Oilless Bearing Group (including 2 which are concerning) .

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.

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