Returns On Capital Are A Standout For Zhejiang Cayi Vacuum Container (SZSE:301004)

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Zhejiang Cayi Vacuum Container's (SZSE:301004) returns on capital, so let's have a look.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Zhejiang Cayi Vacuum Container, this is the formula:

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

0.48 = CN¥693m ÷ (CN¥2.0b - CN¥522m) (Based on the trailing twelve months to June 2024).

Therefore, Zhejiang Cayi Vacuum Container has an ROCE of 48%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 8.8%.

Check out our latest analysis for Zhejiang Cayi Vacuum Container

In the above chart we have measured Zhejiang Cayi Vacuum Container's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Zhejiang Cayi Vacuum Container .

What The Trend Of ROCE Can Tell Us

Zhejiang Cayi Vacuum Container is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 48%. The amount of capital employed has increased too, by 404%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Zhejiang Cayi Vacuum Container's ROCE

All in all, it's terrific to see that Zhejiang Cayi Vacuum Container is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Zhejiang Cayi Vacuum Container can keep these trends up, it could have a bright future ahead.

On a final note, we found 2 warning signs for Zhejiang Cayi Vacuum Container (1 is a bit concerning) you should be aware of.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.