Shareholders Are Optimistic That Aier Eye Hospital Group (SZSE:300015) Will Multiply In Value

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ergo, when we looked at the ROCE trends at Aier Eye Hospital Group (SZSE:300015), we liked what we saw.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Aier Eye Hospital Group:

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

0.21 = CN¥5.3b ÷ (CN¥31b - CN¥5.9b) (Based on the trailing twelve months to March 2024).

Therefore, Aier Eye Hospital Group has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Healthcare industry average of 9.5%.

Check out our latest analysis for Aier Eye Hospital Group

Above you can see how the current ROCE for Aier Eye Hospital Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Aier Eye Hospital Group for free.

What Does the ROCE Trend For Aier Eye Hospital Group Tell Us?

In terms of Aier Eye Hospital Group's history of ROCE, it's quite impressive. The company has employed 220% more capital in the last five years, and the returns on that capital have remained stable at 21%. Now considering ROCE is an attractive 21%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Aier Eye Hospital Group can keep this up, we'd be very optimistic about its future.

The Bottom Line On Aier Eye Hospital Group's ROCE

Aier Eye Hospital Group has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. In light of this, the stock has only gained 7.2% over the last five years for shareholders who have owned the stock in this period. So to determine if Aier Eye Hospital Group is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

On a separate note, we've found 1 warning sign for Aier Eye Hospital Group you'll probably want to know about.

Aier Eye Hospital Group is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.

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