Ningbo Sunrise Elc TechnologyLtd (SZSE:002937) Has More To Do To Multiply In Value Going Forward

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. That's why when we briefly looked at Ningbo Sunrise Elc TechnologyLtd's (SZSE:002937) ROCE trend, we were pretty happy with what we saw.

What Is Return On Capital Employed (ROCE)?

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 Ningbo Sunrise Elc TechnologyLtd, this is the formula:

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

0.15 = CN¥295m ÷ (CN¥2.4b - CN¥457m) (Based on the trailing twelve months to March 2024).

So, Ningbo Sunrise Elc TechnologyLtd has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 5.2% generated by the Electronic industry.

View our latest analysis for Ningbo Sunrise Elc TechnologyLtd

In the above chart we have measured Ningbo Sunrise Elc TechnologyLtd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Ningbo Sunrise Elc TechnologyLtd for free.

The Trend Of ROCE

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 15% for the last five years, and the capital employed within the business has risen 126% in that time. 15% is a pretty standard return, and it provides some comfort knowing that Ningbo Sunrise Elc TechnologyLtd has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On Ningbo Sunrise Elc TechnologyLtd's ROCE

To sum it up, Ningbo Sunrise Elc TechnologyLtd has simply been reinvesting capital steadily, at those decent rates of return. However, over the last five years, the stock has only delivered a 31% return to shareholders who held over that period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

If you want to continue researching Ningbo Sunrise Elc TechnologyLtd, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.