The Return Trends At CETC Cyberspace Security Technology (SZSE:002268) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at CETC Cyberspace Security Technology (SZSE:002268) so let's look a bit deeper.

What Is 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 CETC Cyberspace Security Technology, this is the formula:

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

0.059 = CN¥315m ÷ (CN¥6.9b - CN¥1.6b) (Based on the trailing twelve months to September 2023).

So, CETC Cyberspace Security Technology has an ROCE of 5.9%. In absolute terms, that's a low return, but it's much better than the Software industry average of 2.6%.

View our latest analysis for CETC Cyberspace Security Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for CETC Cyberspace Security Technology's ROCE against it's prior returns. If you'd like to look at how CETC Cyberspace Security Technology has performed in the past in other metrics, you can view this free graph of CETC Cyberspace Security Technology's past earnings, revenue and cash flow.

How Are Returns Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 5.9%. Basically the business is earning more per dollar of capital invested and in addition to that, 24% more capital is being employed now too. So we're very much inspired by what we're seeing at CETC Cyberspace Security Technology thanks to its ability to profitably reinvest capital.

What We Can Learn From CETC Cyberspace Security Technology'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 CETC Cyberspace Security Technology has. Astute investors may have an opportunity here because the stock has declined 41% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our FREE intrinsic value estimation for 002268 that compares the share price and estimated value.

While CETC Cyberspace Security Technology 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.