Accelink Technologies CoLtd (SZSE:002281) Might Have The Makings Of A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Accelink Technologies CoLtd (SZSE:002281) looks quite promising in regards to its trends of return on capital.

What Is Return On Capital Employed (ROCE)?

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 Accelink Technologies CoLtd is:

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

0.069 = CN¥644m ÷ (CN¥14b - CN¥4.2b) (Based on the trailing twelve months to September 2024).

Therefore, Accelink Technologies CoLtd has an ROCE of 6.9%. In absolute terms, that's a low return, but it's much better than the Electronic industry average of 5.6%.

See our latest analysis for Accelink Technologies CoLtd

Above you can see how the current ROCE for Accelink Technologies CoLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Accelink Technologies CoLtd .

So How Is Accelink Technologies CoLtd's ROCE Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 6.9%. Basically the business is earning more per dollar of capital invested and in addition to that, 98% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

In Conclusion...

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 Accelink Technologies CoLtd has. And with a respectable 74% 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. In light of that, we think it's worth looking further into this stock because if Accelink Technologies CoLtd can keep these trends up, it could have a bright future ahead.

Accelink Technologies CoLtd does have some risks, we noticed 2 warning signs (and 1 which is potentially serious) we think you should know about.

While Accelink Technologies CoLtd 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.