The Return Trends At Shanghai Fullhan Microelectronics (SZSE:300613) Look Promising

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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, Shanghai Fullhan Microelectronics (SZSE:300613) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Shanghai Fullhan Microelectronics, this is the formula:

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

0.054 = CN¥186m ÷ (CN¥3.7b - CN¥283m) (Based on the trailing twelve months to September 2024).

So, Shanghai Fullhan Microelectronics has an ROCE of 5.4%. Even though it's in line with the industry average of 4.8%, it's still a low return by itself.

See our latest analysis for Shanghai Fullhan Microelectronics

Above you can see how the current ROCE for Shanghai Fullhan Microelectronics 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 Shanghai Fullhan Microelectronics .

What Can We Tell From Shanghai Fullhan Microelectronics' ROCE Trend?

Shanghai Fullhan Microelectronics has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 5.4% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Shanghai Fullhan Microelectronics is utilizing 202% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Shanghai Fullhan Microelectronics' ROCE

To the delight of most shareholders, Shanghai Fullhan Microelectronics has now broken into profitability. And with a respectable 55% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Shanghai Fullhan Microelectronics, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Shanghai Fullhan Microelectronics may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.