Returns On Capital At Zhejiang Weixing Industrial Development (SZSE:002003) Have Stalled

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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over Zhejiang Weixing Industrial Development's (SZSE:002003) trend of ROCE, we liked what we saw.

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

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. Analysts use this formula to calculate it for Zhejiang Weixing Industrial Development:

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

0.17 = CN¥791m ÷ (CN¥6.8b - CN¥2.2b) (Based on the trailing twelve months to June 2024).

So, Zhejiang Weixing Industrial Development has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 6.1% generated by the Luxury industry.

View our latest analysis for Zhejiang Weixing Industrial Development

Above you can see how the current ROCE for Zhejiang Weixing Industrial Development compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Zhejiang Weixing Industrial Development for free.

So How Is Zhejiang Weixing Industrial Development's ROCE Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 17% for the last five years, and the capital employed within the business has risen 86% in that time. 17% is a pretty standard return, and it provides some comfort knowing that Zhejiang Weixing Industrial Development 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.

The Key Takeaway

The main thing to remember is that Zhejiang Weixing Industrial Development has proven its ability to continually reinvest at respectable rates of return. And the stock has done incredibly well with a 262% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

If you want to know some of the risks facing Zhejiang Weixing Industrial Development we've found 2 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.

While Zhejiang Weixing Industrial Development isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.