The Returns On Capital At Shanghai Anoky Group (SZSE:300067) Don't Inspire Confidence

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Although, when we looked at Shanghai Anoky Group (SZSE:300067), it didn't seem to tick all of these boxes.

Understanding 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 Shanghai Anoky Group:

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

0.0019 = CN¥5.3m ÷ (CN¥3.4b - CN¥648m) (Based on the trailing twelve months to March 2024).

So, Shanghai Anoky Group has an ROCE of 0.2%. Ultimately, that's a low return and it under-performs the Chemicals industry average of 5.5%.

Check out our latest analysis for Shanghai Anoky Group

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 Shanghai Anoky Group has performed in the past in other metrics, you can view this free graph of Shanghai Anoky Group's past earnings, revenue and cash flow.

How Are Returns Trending?

The trend of ROCE doesn't look fantastic because it's fallen from 9.7% five years ago, while the business's capital employed increased by 63%. Usually this isn't ideal, but given Shanghai Anoky Group conducted a capital raising before their most recent earnings announcement, that would've likely contributed, at least partially, to the increased capital employed figure. Shanghai Anoky Group probably hasn't received a full year of earnings yet from the new funds it raised, so these figures should be taken with a grain of salt.

The Bottom Line On Shanghai Anoky Group's ROCE

While returns have fallen for Shanghai Anoky Group in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These trends are starting to be recognized by investors since the stock has delivered a 0.8% gain to shareholders who've held over the last five years. So this stock may still be an appealing investment opportunity, if other fundamentals prove to be sound.

Shanghai Anoky Group does come with some risks though, we found 5 warning signs in our investment analysis, and 3 of those don't sit too well with us...

While Shanghai Anoky Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.