The Returns At Puyang Huicheng Electronic Material (SZSE:300481) Aren't Growing

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Puyang Huicheng Electronic Material (SZSE:300481) looks decent, right now, so lets see what the trend of returns can tell us.

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

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. The formula for this calculation on Puyang Huicheng Electronic Material is:

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

0.11 = CN¥289m ÷ (CN¥2.8b - CN¥244m) (Based on the trailing twelve months to September 2023).

Therefore, Puyang Huicheng Electronic Material has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 6.0% generated by the Chemicals industry.

Check out our latest analysis for Puyang Huicheng Electronic Material

Above you can see how the current ROCE for Puyang Huicheng Electronic Material compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Puyang Huicheng Electronic Material .

What The Trend Of ROCE Can Tell Us

While the returns on capital are good, they haven't moved much. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 244% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Puyang Huicheng Electronic Material 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.

In Conclusion...

The main thing to remember is that Puyang Huicheng Electronic Material has proven its ability to continually reinvest at respectable rates of return. Yet over the last five years the stock has declined 21%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you want to continue researching Puyang Huicheng Electronic Material, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.