Shenzhen TVT Digital Technology (SZSE:002835) Might Have The Makings Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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 when we looked at Shenzhen TVT Digital Technology (SZSE:002835) and its trend of ROCE, we really liked what we saw.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Shenzhen TVT Digital Technology:

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

0.16 = CN¥170m ÷ (CN¥1.4b - CN¥277m) (Based on the trailing twelve months to June 2024).

So, Shenzhen TVT Digital Technology has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Electronic industry average of 5.4% it's much better.

View our latest analysis for Shenzhen TVT Digital Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shenzhen TVT Digital Technology's ROCE against it's prior returns. If you're interested in investigating Shenzhen TVT Digital Technology's past further, check out this free graph covering Shenzhen TVT Digital Technology's past earnings, revenue and cash flow.

So How Is Shenzhen TVT Digital Technology's ROCE Trending?

We like the trends that we're seeing from Shenzhen TVT Digital Technology. The data shows that returns on capital have increased substantially over the last five years to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 62%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Shenzhen TVT Digital Technology's ROCE

All in all, it's terrific to see that Shenzhen TVT Digital Technology is reaping the rewards from prior investments and is growing its capital base. Considering the stock has delivered 22% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

On a final note, we've found 1 warning sign for Shenzhen TVT Digital Technology that we think 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.

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.