Jiangsu Kuangshun Photosensitivity New-Material Stock (SZSE:300537) Is Experiencing Growth In Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Jiangsu Kuangshun Photosensitivity New-Material Stock (SZSE:300537) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Jiangsu Kuangshun Photosensitivity New-Material Stock is:

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

0.069 = CN¥56m ÷ (CN¥1.2b - CN¥421m) (Based on the trailing twelve months to March 2024).

Therefore, Jiangsu Kuangshun Photosensitivity New-Material Stock has an ROCE of 6.9%. In absolute terms, that's a low return, but it's much better than the Chemicals industry average of 5.5%.

Check out our latest analysis for Jiangsu Kuangshun Photosensitivity New-Material Stock

Above you can see how the current ROCE for Jiangsu Kuangshun Photosensitivity New-Material Stock 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 Jiangsu Kuangshun Photosensitivity New-Material Stock .

What Can We Tell From Jiangsu Kuangshun Photosensitivity New-Material Stock's ROCE Trend?

We're pretty happy with how the ROCE has been trending at Jiangsu Kuangshun Photosensitivity New-Material Stock. The data shows that returns on capital have increased by 40% over the trailing five years. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. Speaking of capital employed, the company is actually utilizing 40% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

The Key Takeaway

In the end, Jiangsu Kuangshun Photosensitivity New-Material Stock has proven it's capital allocation skills are good with those higher returns from less amount of capital. Considering the stock has delivered 36% 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. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

On a separate note, we've found 3 warning signs for Jiangsu Kuangshun Photosensitivity New-Material Stock 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.