A Look Into Wuliangye YibinLtd's (SZSE:000858) Impressive Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Wuliangye YibinLtd (SZSE:000858) looks attractive right now, so lets see what the trend of returns can tell us.

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. The formula for this calculation on Wuliangye YibinLtd is:

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

0.30 = CN¥42b ÷ (CN¥172b - CN¥32b) (Based on the trailing twelve months to September 2024).

So, Wuliangye YibinLtd has an ROCE of 30%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

Check out our latest analysis for Wuliangye YibinLtd

Above you can see how the current ROCE for Wuliangye YibinLtd 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 Wuliangye YibinLtd .

So How Is Wuliangye YibinLtd's ROCE Trending?

We'd be pretty happy with returns on capital like Wuliangye YibinLtd. Over the past five years, ROCE has remained relatively flat at around 30% and the business has deployed 97% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

The Bottom Line

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. However, over the last five years, the stock has only delivered a 14% return to shareholders who held over that period. So to determine if Wuliangye YibinLtd is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

While Wuliangye YibinLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for 000858 helps visualize whether it is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.