The Returns At Kuangda Technology Group (SZSE:002516) Aren't Growing

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Kuangda Technology Group (SZSE:002516), it didn't seem to tick all of these boxes.

What Is 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. The formula for this calculation on Kuangda Technology Group is:

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

0.057 = CN¥213m ÷ (CN¥4.4b - CN¥692m) (Based on the trailing twelve months to September 2024).

So, Kuangda Technology Group has an ROCE of 5.7%. On its own, that's a low figure but it's around the 6.6% average generated by the Luxury industry.

View our latest analysis for Kuangda Technology Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Kuangda Technology Group's ROCE against it's prior returns. If you're interested in investigating Kuangda Technology Group's past further, check out this free graph covering Kuangda Technology Group's past earnings, revenue and cash flow.

The Trend Of ROCE

Things have been pretty stable at Kuangda Technology Group, 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. With that in mind, unless investment picks up again in the future, we wouldn't expect Kuangda Technology Group to be a multi-bagger going forward.

The Key Takeaway

We can conclude that in regards to Kuangda Technology Group's returns on capital employed and the trends, there isn't much change to report on. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 110% gain to shareholders who have held over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you want to continue researching Kuangda Technology Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.