The Trend Of High Returns At Shenzhen Mindray Bio-Medical Electronics (SZSE:300760) Has Us Very Interested

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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. And in light of that, the trends we're seeing at Shenzhen Mindray Bio-Medical Electronics' (SZSE:300760) look very promising so lets take a look.

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 Shenzhen Mindray Bio-Medical Electronics:

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

0.29 = CN¥13b ÷ (CN¥58b - CN¥12b) (Based on the trailing twelve months to September 2024).

So, Shenzhen Mindray Bio-Medical Electronics has an ROCE of 29%. That's a fantastic return and not only that, it outpaces the average of 6.8% earned by companies in a similar industry.

View 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?

The trends we've noticed at Shenzhen Mindray Bio-Medical Electronics are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 29%. The amount of capital employed has increased too, by 136%. 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.

The Bottom Line On Shenzhen Mindray Bio-Medical Electronics' ROCE

In summary, it's great to see that Shenzhen Mindray Bio-Medical Electronics can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 7.3% to shareholders. So with that in mind, we think the stock deserves further research.

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.

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.