Heilongjiang Publishing & Media (SHSE:605577) Is Doing The Right Things To Multiply Its Share Price

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Heilongjiang Publishing & Media (SHSE:605577) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Heilongjiang Publishing & Media:

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

0.10 = CN¥457m ÷ (CN¥5.5b - CN¥968m) (Based on the trailing twelve months to September 2023).

Therefore, Heilongjiang Publishing & Media has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Media industry average of 4.8% it's much better.

Check out our latest analysis for Heilongjiang Publishing & Media

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 Heilongjiang Publishing & Media has performed in the past in other metrics, you can view this free graph of Heilongjiang Publishing & Media's past earnings, revenue and cash flow.

What Does the ROCE Trend For Heilongjiang Publishing & Media Tell Us?

Heilongjiang Publishing & Media is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. Basically the business is earning more per dollar of capital invested and in addition to that, 41% more capital is being employed now too. So we're very much inspired by what we're seeing at Heilongjiang Publishing & Media thanks to its ability to profitably reinvest capital.

The Bottom Line On Heilongjiang Publishing & Media's ROCE

All in all, it's terrific to see that Heilongjiang Publishing & Media is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a solid 73% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Heilongjiang Publishing & Media, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Heilongjiang Publishing & Media isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.