Silvery Dragon Prestressed MaterialsLTD Tianjin (SHSE:603969) Has Some Way To Go To Become A Multi-Bagger

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. That's why when we briefly looked at Silvery Dragon Prestressed MaterialsLTD Tianjin's (SHSE:603969) ROCE trend, we were pretty happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

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 Silvery Dragon Prestressed MaterialsLTD Tianjin, this is the formula:

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

0.11 = CN¥287m ÷ (CN¥3.8b - CN¥1.3b) (Based on the trailing twelve months to September 2024).

Therefore, Silvery Dragon Prestressed MaterialsLTD Tianjin has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 6.8% generated by the Metals and Mining industry.

See our latest analysis for Silvery Dragon Prestressed MaterialsLTD Tianjin

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Silvery Dragon Prestressed MaterialsLTD Tianjin has performed in the past in other metrics, you can view this free graph of Silvery Dragon Prestressed MaterialsLTD Tianjin's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. The company has employed 42% more capital in the last five years, and the returns on that capital have remained stable at 11%. 11% is a pretty standard return, and it provides some comfort knowing that Silvery Dragon Prestressed MaterialsLTD Tianjin has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On Silvery Dragon Prestressed MaterialsLTD Tianjin's ROCE

In the end, Silvery Dragon Prestressed MaterialsLTD Tianjin has proven its ability to adequately reinvest capital at good rates of return. And the stock has followed suit returning a meaningful 73% to shareholders over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

On a separate note, we've found 1 warning sign for Silvery Dragon Prestressed MaterialsLTD Tianjin you'll probably want to know about.

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.