Stock Analysis

Jiangsu Pacific Quartz (SHSE:603688) Knows How To Allocate Capital Effectively

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SHSE:603688

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. And in light of that, the trends we're seeing at Jiangsu Pacific Quartz's (SHSE:603688) look very promising so lets take a look.

Understanding Return On Capital Employed (ROCE)

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 Jiangsu Pacific Quartz is:

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

0.22 = CN¥1.3b ÷ (CN¥6.5b - CN¥616m) (Based on the trailing twelve months to September 2024).

So, Jiangsu Pacific Quartz has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Semiconductor industry average of 4.8%.

Check out our latest analysis for Jiangsu Pacific Quartz

SHSE:603688 Return on Capital Employed December 3rd 2024

In the above chart we have measured Jiangsu Pacific Quartz's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Jiangsu Pacific Quartz for free.

So How Is Jiangsu Pacific Quartz's ROCE Trending?

We like the trends that we're seeing from Jiangsu Pacific Quartz. Over the last five years, returns on capital employed have risen substantially to 22%. 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 303%. So we're very much inspired by what we're seeing at Jiangsu Pacific Quartz thanks to its ability to profitably reinvest capital.

What We Can Learn From Jiangsu Pacific Quartz's ROCE

To sum it up, Jiangsu Pacific Quartz 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 staggering 221% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

While Jiangsu Pacific Quartz looks impressive, no company is worth an infinite price. The intrinsic value infographic for 603688 helps visualize whether it is currently trading for a fair price.

Jiangsu Pacific Quartz is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.