Returns At Luolai Lifestyle Technology (SZSE:002293) Appear To Be Weighed Down

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Luolai Lifestyle Technology (SZSE:002293) 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)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Luolai Lifestyle Technology is:

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

0.097 = CN¥428m ÷ (CN¥6.3b - CN¥1.9b) (Based on the trailing twelve months to September 2024).

So, Luolai Lifestyle Technology has an ROCE of 9.7%. In absolute terms, that's a low return, but it's much better than the Luxury industry average of 6.5%.

View our latest analysis for Luolai Lifestyle Technology

Above you can see how the current ROCE for Luolai Lifestyle Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Luolai Lifestyle Technology .

What Can We Tell From Luolai Lifestyle Technology's ROCE Trend?

Things have been pretty stable at Luolai Lifestyle Technology, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at Luolai Lifestyle Technology in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Bottom Line On Luolai Lifestyle Technology's ROCE

We can conclude that in regards to Luolai Lifestyle Technology's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 25% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

One more thing to note, we've identified 1 warning sign with Luolai Lifestyle Technology and understanding it should be part of your investment process.

While Luolai Lifestyle Technology isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.