Shareholders Would Enjoy A Repeat Of Zhejiang Cayi Vacuum Container's (SZSE:301004) Recent Growth In Returns

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. 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.

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

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)

0.45 = CN¥764m ÷ (CN¥2.3b - CN¥589m) (Based on the trailing twelve months to September 2024).

Therefore, Zhejiang Cayi Vacuum Container has an ROCE of 45%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 9.6%.

See our latest analysis for Zhejiang Cayi Vacuum Container

Above you can see how the current ROCE for Zhejiang Cayi Vacuum Container compares to its prior returns on capital, but there's only so much you can tell from the past. 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 .

The Trend Of ROCE

We like the trends that we're seeing from Zhejiang Cayi Vacuum Container. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 45%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 449%. So we're very much inspired by what we're seeing at Zhejiang Cayi Vacuum Container thanks to its ability to profitably reinvest capital.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Zhejiang Cayi Vacuum Container has. Since the stock has returned a staggering 410% to shareholders over the last three years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Zhejiang Cayi Vacuum Container does have some risks though, and we've spotted 1 warning sign for Zhejiang Cayi Vacuum Container that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.