There's Been No Shortage Of Growth Recently For Heilongjiang Publishing & Media's (SHSE:605577) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Heilongjiang Publishing & Media (SHSE:605577) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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 Heilongjiang Publishing & Media is:

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

0.054 = CN¥247m ÷ (CN¥5.6b - CN¥957m) (Based on the trailing twelve months to March 2024).

So, Heilongjiang Publishing & Media has an ROCE of 5.4%. 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.

Check out our latest analysis for Heilongjiang Publishing & Media

Historical performance is a great place to start when researching a stock so above you can see the gauge for Heilongjiang Publishing & Media's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Heilongjiang Publishing & Media.

The Trend Of ROCE

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 5.4%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 41%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

Our Take On Heilongjiang Publishing & Media's ROCE

To sum it up, Heilongjiang Publishing & Media has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a solid 33% to shareholders over the last year, it's fair to say investors are beginning to recognize these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Heilongjiang Publishing & Media does have some risks though, and we've spotted 2 warning signs for Heilongjiang Publishing & Media that you might be interested in.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com