Return Trends At Jiang Su Suyan JingshenLtd (SHSE:603299) Aren't Appealing

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at Jiang Su Suyan JingshenLtd's (SHSE:603299) ROCE trend, we were pretty happy with what we saw.

What Is Return On Capital Employed (ROCE)?

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 Jiang Su Suyan JingshenLtd is:

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

0.11 = CN¥839m ÷ (CN¥11b - CN¥3.2b) (Based on the trailing twelve months to March 2024).

So, Jiang Su Suyan JingshenLtd has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 5.6% generated by the Chemicals industry.

Check out our latest analysis for Jiang Su Suyan JingshenLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Jiang Su Suyan JingshenLtd's ROCE against it's prior returns. If you'd like to look at how Jiang Su Suyan JingshenLtd has performed in the past in other metrics, you can view this free graph of Jiang Su Suyan JingshenLtd's past earnings, revenue and cash flow.

What Can We Tell From Jiang Su Suyan JingshenLtd's ROCE Trend?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 11% and the business has deployed 84% more capital into its operations. 11% is a pretty standard return, and it provides some comfort knowing that Jiang Su Suyan JingshenLtd has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

On a side note, Jiang Su Suyan JingshenLtd has done well to reduce current liabilities to 30% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Key Takeaway

The main thing to remember is that Jiang Su Suyan JingshenLtd has proven its ability to continually reinvest at respectable rates of return. However, over the last five years, the stock has only delivered a 28% return to shareholders who held over that period. So to determine if Jiang Su Suyan JingshenLtd is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

One more thing to note, we've identified 1 warning sign with Jiang Su Suyan JingshenLtd and understanding it should be part of your investment process.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.