Wuxi Boton Technology (SZSE:300031) Will Be Hoping To Turn Its Returns On Capital Around

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Wuxi Boton Technology (SZSE:300031) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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 Wuxi Boton Technology:

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

0.024 = CN¥92m ÷ (CN¥5.6b - CN¥1.7b) (Based on the trailing twelve months to September 2023).

So, Wuxi Boton Technology has an ROCE of 2.4%. In absolute terms, that's a low return and it also under-performs the Entertainment industry average of 3.8%.

View our latest analysis for Wuxi Boton Technology

Above you can see how the current ROCE for Wuxi Boton Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Wuxi Boton Technology .

The Trend Of ROCE

The trend of ROCE doesn't look fantastic because it's fallen from 13% five years ago, while the business's capital employed increased by 48%. That being said, Wuxi Boton Technology raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. It's unlikely that all of the funds raised have been put to work yet, so as a consequence Wuxi Boton Technology might not have received a full period of earnings contribution from it.

Our Take On Wuxi Boton Technology's ROCE

To conclude, we've found that Wuxi Boton Technology is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 9.4% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you want to continue researching Wuxi Boton Technology, you might be interested to know about the 1 warning sign that our analysis has discovered.

While Wuxi Boton Technology 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.