China South Publishing & Media Group (SHSE:601098) Has Some Way To Go To Become A Multi-Bagger

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think China South Publishing & Media Group (SHSE:601098) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. Analysts use this formula to calculate it for China South Publishing & Media Group:

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

0.091 = CN¥1.6b ÷ (CN¥26b - CN¥8.5b) (Based on the trailing twelve months to March 2024).

Thus, China South Publishing & Media Group has an ROCE of 9.1%. On its own that's a low return, but compared to the average of 4.0% generated by the Media industry, it's much better.

View our latest analysis for China South Publishing & Media Group

In the above chart we have measured China South Publishing & Media Group's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for China South Publishing & Media Group .

What Does the ROCE Trend For China South Publishing & Media Group Tell Us?

There hasn't been much to report for China South Publishing & Media Group's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if China South Publishing & Media Group doesn't end up being a multi-bagger in a few years time.

The Bottom Line

We can conclude that in regards to China South Publishing & Media Group's returns on capital employed and the trends, there isn't much change to report on. Since the stock has gained an impressive 41% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

One more thing, we've spotted 1 warning sign facing China South Publishing & Media Group that you might find interesting.

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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.