Nanfang Black Sesame GroupLtd (SZSE:000716) Shareholders Will Want The ROCE Trajectory To Continue
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Nanfang Black Sesame GroupLtd (SZSE:000716) and its trend of ROCE, we really liked what we saw.
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 Nanfang Black Sesame GroupLtd:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.058 = CN¥169m ÷ (CN¥4.5b - CN¥1.5b) (Based on the trailing twelve months to September 2024).
Thus, Nanfang Black Sesame GroupLtd has an ROCE of 5.8%. On its own, that's a low figure but it's around the 6.8% average generated by the Food industry.
See our latest analysis for Nanfang Black Sesame GroupLtd
Historical performance is a great place to start when researching a stock so above you can see the gauge for Nanfang Black Sesame GroupLtd's ROCE against it's prior returns. If you'd like to look at how Nanfang Black Sesame GroupLtd has performed in the past in other metrics, you can view this free graph of Nanfang Black Sesame GroupLtd's past earnings, revenue and cash flow.
What Does the ROCE Trend For Nanfang Black Sesame GroupLtd Tell Us?
Nanfang Black Sesame GroupLtd has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 133% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
The Key Takeaway
As discussed above, Nanfang Black Sesame GroupLtd appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
Like most companies, Nanfang Black Sesame GroupLtd does come with some risks, and we've found 4 warning signs that you should be aware of.
While Nanfang Black Sesame GroupLtd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
Valuation is complex, but we're here to simplify it.
Discover if Nanfang Black Sesame GroupLtd might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
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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.
About SZSE:000716
Nanfang Black Sesame GroupLtd
Researches, develops, produces, and sells black sesame health products in China.
Slight with questionable track record.