TangShan Port GroupLtd (SHSE:601000) Has More To Do To Multiply In Value Going Forward

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating TangShan Port GroupLtd (SHSE:601000), we don't think it's current trends fit the mold of a multi-bagger.

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. To calculate this metric for TangShan Port GroupLtd, this is the formula:

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

0.089 = CN¥2.0b ÷ (CN¥24b - CN¥1.6b) (Based on the trailing twelve months to September 2024).

So, TangShan Port GroupLtd has an ROCE of 8.9%. In absolute terms, that's a low return, but it's much better than the Infrastructure industry average of 4.9%.

Check out our latest analysis for TangShan Port GroupLtd

In the above chart we have measured TangShan Port 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 TangShan Port GroupLtd .

What Can We Tell From TangShan Port GroupLtd's ROCE Trend?

Over the past five years, TangShan Port GroupLtd's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at TangShan Port GroupLtd in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

On a side note, TangShan Port GroupLtd has done well to reduce current liabilities to 6.6% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

The Bottom Line On TangShan Port GroupLtd's ROCE

We can conclude that in regards to TangShan Port GroupLtd's returns on capital employed and the trends, there isn't much change to report on. Yet to long term shareholders the stock has gifted them an incredible 153% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

One more thing, we've spotted 1 warning sign facing TangShan Port GroupLtd that you might find interesting.

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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.