Returns Are Gaining Momentum At Suzhou Kingswood Education Technology (SZSE:300192)

If you're looking for a multi-bagger, there's a few things to keep an eye out 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Suzhou Kingswood Education Technology (SZSE:300192) and its trend of ROCE, we really liked 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. The formula for this calculation on Suzhou Kingswood Education Technology is:

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

0.19 = CN¥165m ÷ (CN¥1.1b - CN¥226m) (Based on the trailing twelve months to June 2024).

Therefore, Suzhou Kingswood Education Technology has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 5.5% generated by the Chemicals industry.

View our latest analysis for Suzhou Kingswood Education Technology

Above you can see how the current ROCE for Suzhou Kingswood Education Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Suzhou Kingswood Education Technology for free.

What Does the ROCE Trend For Suzhou Kingswood Education Technology Tell Us?

We're pretty happy with how the ROCE has been trending at Suzhou Kingswood Education Technology. The data shows that returns on capital have increased by 43% over the trailing five years. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Interestingly, the business may be becoming more efficient because it's applying 26% less capital than it was five years ago. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

The Bottom Line On Suzhou Kingswood Education Technology's ROCE

In a nutshell, we're pleased to see that Suzhou Kingswood Education Technology has been able to generate higher returns from less capital. Since the stock has only returned 28% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

On a final note, we found 2 warning signs for Suzhou Kingswood Education Technology (1 is significant) you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.