The Returns At Kuaijishan Shaoxing Rice Wine (SHSE:601579) Aren't Growing

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. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Kuaijishan Shaoxing Rice Wine (SHSE:601579), we don't think it's current trends fit the mold of a multi-bagger.

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 Kuaijishan Shaoxing Rice Wine:

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

0.06 = CN¥224m ÷ (CN¥4.3b - CN¥520m) (Based on the trailing twelve months to June 2024).

So, Kuaijishan Shaoxing Rice Wine has an ROCE of 6.0%. In absolute terms, that's a low return and it also under-performs the Beverage industry average of 16%.

Check out our latest analysis for Kuaijishan Shaoxing Rice Wine

Above you can see how the current ROCE for Kuaijishan Shaoxing Rice Wine 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 Kuaijishan Shaoxing Rice Wine .

What Can We Tell From Kuaijishan Shaoxing Rice Wine's ROCE Trend?

Things have been pretty stable at Kuaijishan Shaoxing Rice Wine, 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 don't be surprised if Kuaijishan Shaoxing Rice Wine doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Kuaijishan Shaoxing Rice Wine's ROCE

In summary, Kuaijishan Shaoxing Rice Wine isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors may be recognizing these trends since the stock has only returned a total of 19% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

On a separate note, we've found 1 warning sign for Kuaijishan Shaoxing Rice Wine you'll probably want to know about.

While Kuaijishan Shaoxing Rice Wine isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.