The Return Trends At Tianjin Printronics Circuit (SZSE:002134) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Tianjin Printronics Circuit's (SZSE:002134) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Tianjin Printronics Circuit is:

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

0.042 = CN¥51m ÷ (CN¥1.8b - CN¥564m) (Based on the trailing twelve months to June 2024).

Therefore, Tianjin Printronics Circuit has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Electronic industry average of 5.4%.

See our latest analysis for Tianjin Printronics Circuit

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Tianjin Printronics Circuit's past further, check out this free graph covering Tianjin Printronics Circuit's past earnings, revenue and cash flow.

The Trend Of ROCE

The fact that Tianjin Printronics Circuit is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 4.2% on its capital. Not only that, but the company is utilizing 208% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line

In summary, it's great to see that Tianjin Printronics Circuit has managed to break into profitability and is continuing to reinvest in its business. Given the stock has declined 11% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Tianjin Printronics Circuit (of which 2 are concerning!) that you should know about.

While Tianjin Printronics Circuit 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.