Here's What To Make Of Beijing InHand Networks Technology's (SHSE:688080) Decelerating Rates Of Return

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. That's why when we briefly looked at Beijing InHand Networks Technology's (SHSE:688080) ROCE trend, we were pretty happy with what we saw.

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Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for Beijing InHand Networks Technology, this is the formula:

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

0.15 = CN¥148m ÷ (CN¥1.2b - CN¥174m) (Based on the trailing twelve months to December 2024).

So, Beijing InHand Networks Technology has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 4.0% generated by the Communications industry.

View our latest analysis for Beijing InHand Networks Technology

Above you can see how the current ROCE for Beijing InHand Networks Technology 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 Beijing InHand Networks Technology .

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 238% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Beijing InHand Networks Technology has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

Our Take On Beijing InHand Networks Technology's ROCE

To sum it up, Beijing InHand Networks Technology has simply been reinvesting capital steadily, at those decent rates of return. Yet over the last five years the stock has declined 14%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

Like most companies, Beijing InHand Networks Technology does come with some risks, and we've found 1 warning sign that you should be aware of.

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.

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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.