Returns On Capital Are A Standout For Anhui Yingjia Distillery (SHSE:603198)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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 Anhui Yingjia Distillery's (SHSE:603198) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Anhui Yingjia Distillery, this is the formula:

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

0.36 = CN¥3.4b ÷ (CN¥12b - CN¥2.6b) (Based on the trailing twelve months to September 2024).

Thus, Anhui Yingjia Distillery has an ROCE of 36%. In absolute terms that's a great return and it's even better than the Beverage industry average of 18%.

View our latest analysis for Anhui Yingjia Distillery

In the above chart we have measured Anhui Yingjia Distillery's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Anhui Yingjia Distillery .

How Are Returns Trending?

Investors would be pleased with what's happening at Anhui Yingjia Distillery. The data shows that returns on capital have increased substantially over the last five years to 36%. The amount of capital employed has increased too, by 110%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line On Anhui Yingjia Distillery's ROCE

In summary, it's great to see that Anhui Yingjia Distillery can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 234% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

While Anhui Yingjia Distillery looks impressive, no company is worth an infinite price. The intrinsic value infographic for 603198 helps visualize whether it is currently trading for a fair price.

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.