There Are Reasons To Feel Uneasy About Easy Click Worldwide Network Technology's (SZSE:301171) 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Easy Click Worldwide Network Technology (SZSE:301171) 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?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Easy Click Worldwide Network Technology is:

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

0.06 = CN¥217m ÷ (CN¥5.6b - CN¥2.0b) (Based on the trailing twelve months to September 2024).

Thus, Easy Click Worldwide Network Technology has an ROCE of 6.0%. In absolute terms, that's a low return but it's around the Media industry average of 5.2%.

See our latest analysis for Easy Click Worldwide Network Technology

Above you can see how the current ROCE for Easy Click Worldwide Network Technology 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 Easy Click Worldwide Network Technology .

What The Trend Of ROCE Can Tell Us

On the surface, the trend of ROCE at Easy Click Worldwide Network Technology doesn't inspire confidence. To be more specific, ROCE has fallen from 20% over the last five years. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line On Easy Click Worldwide Network Technology's ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Easy Click Worldwide Network Technology. And the stock has followed suit returning a meaningful 89% to shareholders over the last year. So should these growth trends continue, we'd be optimistic on the stock going forward.

Easy Click Worldwide Network Technology does have some risks, we noticed 2 warning signs (and 1 which is potentially serious) we think you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.