Shanghai BOCHU Electronic Technology (SHSE:688188) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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 BOCHU Electronic Technology (SHSE:688188) 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 Shanghai BOCHU Electronic Technology is:

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

0.18 = CN¥938m ÷ (CN¥5.7b - CN¥363m) (Based on the trailing twelve months to September 2024).

Thus, Shanghai BOCHU Electronic Technology has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 5.5% generated by the Electronic industry.

View our latest analysis for Shanghai BOCHU Electronic Technology

Above you can see how the current ROCE for Shanghai BOCHU Electronic 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 Shanghai BOCHU Electronic Technology .

So How Is Shanghai BOCHU Electronic Technology's ROCE Trending?

Shanghai BOCHU Electronic Technology is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. Basically the business is earning more per dollar of capital invested and in addition to that, 154% more capital is being employed now too. So we're very much inspired by what we're seeing at Shanghai BOCHU Electronic Technology thanks to its ability to profitably reinvest capital.

In Conclusion...

All in all, it's terrific to see that Shanghai BOCHU Electronic Technology is reaping the rewards from prior investments and is growing its capital base. And a remarkable 146% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Shanghai BOCHU Electronic 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.