Returns On Capital At YTO Express GroupLtd (SHSE:600233) Have Hit The Brakes

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, 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. With that in mind, the ROCE of YTO Express GroupLtd (SHSE:600233) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding 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 YTO Express GroupLtd, this is the formula:

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

0.14 = CN¥4.7b ÷ (CN¥45b - CN¥12b) (Based on the trailing twelve months to September 2024).

Thus, YTO Express GroupLtd has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Logistics industry average of 7.5% it's much better.

View our latest analysis for YTO Express GroupLtd

In the above chart we have measured YTO Express GroupLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for YTO Express GroupLtd .

What Does the ROCE Trend For YTO Express GroupLtd Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 104% in that time. 14% is a pretty standard return, and it provides some comfort knowing that YTO Express GroupLtd 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 Key Takeaway

The main thing to remember is that YTO Express GroupLtd has proven its ability to continually reinvest at respectable rates of return. In light of this, the stock has only gained 3.7% over the last five years for shareholders who have owned the stock in this 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.

YTO Express GroupLtd does have some risks though, and we've spotted 1 warning sign for YTO Express GroupLtd that you might be interested in.

While YTO Express GroupLtd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.