Shareholders Would Enjoy A Repeat Of Shenzhen Mindray Bio-Medical Electronics' (SZSE:300760) Recent Growth In Returns

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Shenzhen Mindray Bio-Medical Electronics (SZSE:300760) looks great, so lets see what the trend can tell us.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Shenzhen Mindray Bio-Medical Electronics, this is the formula:

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

0.32 = CN¥13b ÷ (CN¥51b - CN¥11b) (Based on the trailing twelve months to March 2024).

Therefore, Shenzhen Mindray Bio-Medical Electronics has an ROCE of 32%. That's a fantastic return and not only that, it outpaces the average of 6.4% earned by companies in a similar industry.

Check out our latest analysis for Shenzhen Mindray Bio-Medical Electronics

Above you can see how the current ROCE for Shenzhen Mindray Bio-Medical Electronics 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 Shenzhen Mindray Bio-Medical Electronics .

What Can We Tell From Shenzhen Mindray Bio-Medical Electronics' ROCE Trend?

Shenzhen Mindray Bio-Medical Electronics is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 32%. The amount of capital employed has increased too, by 123%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Shenzhen Mindray Bio-Medical Electronics' ROCE

All in all, it's terrific to see that Shenzhen Mindray Bio-Medical Electronics is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 79% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

Shenzhen Mindray Bio-Medical Electronics does have some risks though, and we've spotted 1 warning sign for Shenzhen Mindray Bio-Medical Electronics that you might be interested in.

Shenzhen Mindray Bio-Medical Electronics 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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