Returns On Capital Are Showing Encouraging Signs At Fujian Boss Software (SZSE:300525)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Fujian Boss Software (SZSE:300525) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Fujian Boss Software:

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

0.12 = CN¥364m ÷ (CN¥4.0b - CN¥866m) (Based on the trailing twelve months to September 2024).

Therefore, Fujian Boss Software has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 3.7% generated by the IT industry.

View our latest analysis for Fujian Boss Software

In the above chart we have measured Fujian Boss Software'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 Fujian Boss Software .

How Are Returns Trending?

The trends we've noticed at Fujian Boss Software are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 12%. The amount of capital employed has increased too, by 156%. So we're very much inspired by what we're seeing at Fujian Boss Software thanks to its ability to profitably reinvest capital.

Our Take On Fujian Boss Software's ROCE

To sum it up, Fujian Boss Software has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 65% 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.

On a separate note, we've found 1 warning sign for Fujian Boss Software you'll probably want to know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.