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

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So on that note, Anji Microelectronics Technology (Shanghai) (SHSE:688019) looks quite promising in regards to its trends of return on capital.

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. The formula for this calculation on Anji Microelectronics Technology (Shanghai) is:

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

0.14 = CN¥403m ÷ (CN¥3.2b - CN¥344m) (Based on the trailing twelve months to September 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 4.9% it's much better.

View our latest analysis for Anji Microelectronics Technology (Shanghai)

In the above chart we have measured Anji Microelectronics Technology (Shanghai)'s prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Anji Microelectronics Technology (Shanghai) .

What Can We Tell From Anji Microelectronics Technology (Shanghai)'s ROCE Trend?

We like the trends that we're seeing from Anji Microelectronics Technology (Shanghai). Over the last five years, returns on capital employed have risen substantially 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 225%. So we're very much inspired by what we're seeing at Anji Microelectronics Technology (Shanghai) thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Anji Microelectronics Technology (Shanghai) is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 120% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Anji Microelectronics Technology (Shanghai) can keep these trends up, it could have a bright future ahead.

Anji Microelectronics Technology (Shanghai) does have some risks though, and we've spotted 1 warning sign for Anji Microelectronics Technology (Shanghai) that you might be interested in.

While Anji Microelectronics Technology (Shanghai) 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.