Anji Microelectronics Technology (Shanghai) (SHSE:688019) Is Experiencing Growth In Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Anji Microelectronics Technology (Shanghai) (SHSE:688019) so let's look a bit deeper.

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. Analysts use this formula to calculate it for Anji Microelectronics Technology (Shanghai):

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

0.14 = CN¥346m ÷ (CN¥2.7b - CN¥204m) (Based on the trailing twelve months to March 2024).

Therefore, Anji Microelectronics Technology (Shanghai) has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 4.6% it's much better.

View our latest analysis for Anji Microelectronics Technology (Shanghai)

Above you can see how the current ROCE for Anji Microelectronics Technology (Shanghai) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Anji Microelectronics Technology (Shanghai) for free.

So How Is Anji Microelectronics Technology (Shanghai)'s ROCE Trending?

The trends we've noticed at Anji Microelectronics Technology (Shanghai) are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. 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 567%. So we're very much inspired by what we're seeing at Anji Microelectronics Technology (Shanghai) thanks to its ability to profitably reinvest capital.

The Bottom Line On Anji Microelectronics Technology (Shanghai)'s ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Anji Microelectronics Technology (Shanghai) has. Since the stock has returned a solid 65% to shareholders over the last five years, 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.

On a separate note, we've found 1 warning sign for Anji Microelectronics Technology (Shanghai) you'll probably want to 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.