The Returns At Impulse (Qingdao) Health TechLtd (SZSE:002899) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Impulse (Qingdao) Health TechLtd (SZSE:002899) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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 Impulse (Qingdao) Health TechLtd:

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

0.044 = CN¥104m ÷ (CN¥3.0b - CN¥608m) (Based on the trailing twelve months to September 2024).

Thus, Impulse (Qingdao) Health TechLtd has an ROCE of 4.4%. In absolute terms, that's a low return but it's around the Leisure industry average of 5.3%.

View our latest analysis for Impulse (Qingdao) Health TechLtd

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

The Trend Of ROCE

The returns on capital haven't changed much for Impulse (Qingdao) Health TechLtd in recent years. The company has employed 126% more capital in the last five years, and the returns on that capital have remained stable at 4.4%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On Impulse (Qingdao) Health TechLtd's ROCE

Long story short, while Impulse (Qingdao) Health TechLtd has been reinvesting its capital, the returns that it's generating haven't increased. Although the market must be expecting these trends to improve because the stock has gained 77% over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

One more thing to note, we've identified 1 warning sign with Impulse (Qingdao) Health TechLtd and understanding this should be part of your investment process.

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.