There's Been No Shortage Of Growth Recently For China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd's (SZSE:000758) Returns On Capital

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Speaking of which, we noticed some great changes in China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd's (SZSE:000758) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd:

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

0.072 = CN¥859m ÷ (CN¥19b - CN¥7.5b) (Based on the trailing twelve months to March 2024).

So, China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd has an ROCE of 7.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.7%.

See our latest analysis for China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd.

What Does the ROCE Trend For China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd Tell Us?

China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 307% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

What We Can Learn From China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd's ROCE

As discussed above, China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Considering the stock has delivered 3.4% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

While China Nonferrous Metal Industry's Foreign Engineering and ConstructionLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for 000758 helps visualize whether it is currently trading for a fair price.

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.

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