We Like Jason Furniture (Hangzhou)Ltd's (SHSE:603816) Returns And Here's How They're Trending

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. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. And in light of that, the trends we're seeing at Jason Furniture (Hangzhou)Ltd's (SHSE:603816) look very promising so lets take a look.

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 Jason Furniture (Hangzhou)Ltd:

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

0.20 = CN¥2.1b ÷ (CN¥16b - CN¥5.7b) (Based on the trailing twelve months to September 2024).

Thus, Jason Furniture (Hangzhou)Ltd has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 9.6%.

See our latest analysis for Jason Furniture (Hangzhou)Ltd

In the above chart we have measured Jason Furniture (Hangzhou)Ltd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Jason Furniture (Hangzhou)Ltd .

What Does the ROCE Trend For Jason Furniture (Hangzhou)Ltd Tell Us?

We like the trends that we're seeing from Jason Furniture (Hangzhou)Ltd. Over the last five years, returns on capital employed have risen substantially to 20%. The amount of capital employed has increased too, by 42%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Jason Furniture (Hangzhou)Ltd's ROCE

All in all, it's terrific to see that Jason Furniture (Hangzhou)Ltd is reaping the rewards from prior investments and is growing its capital base. Since the stock has only returned 1.5% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to continue researching Jason Furniture (Hangzhou)Ltd, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.