FIYTA Precision Technology (SZSE:000026) Has Some Way To Go To Become A Multi-Bagger

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. That's why when we briefly looked at FIYTA Precision Technology's (SZSE:000026) ROCE trend, we were pretty happy with what we saw.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for FIYTA Precision Technology, this is the formula:

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

0.12 = CN¥391m ÷ (CN¥4.1b - CN¥787m) (Based on the trailing twelve months to June 2024).

Thus, FIYTA Precision Technology has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Luxury industry average of 6.1% it's much better.

Check out our latest analysis for FIYTA Precision Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for FIYTA Precision Technology's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of FIYTA Precision Technology.

How Are Returns Trending?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 12% and the business has deployed 25% more capital into its operations. 12% is a pretty standard return, and it provides some comfort knowing that FIYTA Precision Technology has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

What We Can Learn From FIYTA Precision Technology's ROCE

In the end, FIYTA Precision Technology has proven its ability to adequately reinvest capital at good rates of return. And the stock has followed suit returning a meaningful 56% to shareholders over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

FIYTA Precision Technology does have some risks though, and we've spotted 1 warning sign for FIYTA Precision Technology that you might be interested in.

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.