Winning Health Technology Group (SZSE:300253) Is Reinvesting At Lower Rates Of Return

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Winning Health Technology Group (SZSE:300253), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding Return On Capital Employed (ROCE)

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 Winning Health Technology Group:

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

0.047 = CN¥331m ÷ (CN¥8.6b - CN¥1.5b) (Based on the trailing twelve months to September 2024).

So, Winning Health Technology Group has an ROCE of 4.7%. On its own that's a low return, but compared to the average of 1.8% generated by the Healthcare Services industry, it's much better.

View our latest analysis for Winning Health Technology Group

In the above chart we have measured Winning Health Technology Group's prior ROCE against its prior performance, but the future is arguably more important. 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 .

So How Is Winning Health Technology Group's ROCE Trending?

On the surface, the trend of ROCE at Winning Health Technology Group doesn't inspire confidence. Over the last five years, returns on capital have decreased to 4.7% from 10% five years ago. However it looks like Winning Health Technology Group might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. 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.

The Bottom Line

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 investors appear hesitant that the trends will pick up because the stock has fallen 35% in the last five years. Therefore based on the analysis done in this article, we don't think Winning Health Technology Group has the makings of a multi-bagger.

On a final note, we found 2 warning signs for Winning Health Technology Group (1 is potentially serious) you should be aware of.

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.