Returns On Capital At Winning Health Technology Group (SZSE:300253) Paint A Concerning Picture

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Winning Health Technology Group (SZSE:300253), 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. The formula for this calculation on Winning Health Technology Group is:

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

0.023 = CN¥149m ÷ (CN¥7.9b - CN¥1.4b) (Based on the trailing twelve months to September 2023).

Thus, Winning Health Technology Group has an ROCE of 2.3%. Ultimately, that's a low return and it under-performs the Healthcare Services industry average of 11%.

View our latest analysis for Winning Health Technology Group

Above you can see how the current ROCE for Winning Health Technology Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Winning Health Technology Group .

The Trend Of ROCE

When we looked at the ROCE trend at Winning Health Technology Group, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 2.3% from 11% five years ago. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

What We Can Learn From Winning Health Technology Group's ROCE

In summary, Winning Health Technology Group is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And in the last five years, the stock has given away 32% so the market doesn't look too hopeful on these trends strengthening any time soon. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

Winning Health Technology Group does have some risks though, and we've spotted 2 warning signs for Winning Health Technology Group that you might be interested in.

While Winning Health Technology Group 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.