We Like These Underlying Return On Capital Trends At Shenzhen Yan Tian Port HoldingsLtd (SZSE:000088)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Shenzhen Yan Tian Port HoldingsLtd's (SZSE:000088) returns on capital, so let's have a look.

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 Shenzhen Yan Tian Port HoldingsLtd, this is the formula:

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

0.011 = CN¥183m ÷ (CN¥17b - CN¥883m) (Based on the trailing twelve months to September 2023).

Thus, Shenzhen Yan Tian Port HoldingsLtd has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 5.2%.

See our latest analysis for Shenzhen Yan Tian Port HoldingsLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shenzhen Yan Tian Port HoldingsLtd's ROCE against it's prior returns. If you'd like to look at how Shenzhen Yan Tian Port HoldingsLtd has performed in the past in other metrics, you can view this free graph of Shenzhen Yan Tian Port HoldingsLtd's past earnings, revenue and cash flow.

What Does the ROCE Trend For Shenzhen Yan Tian Port HoldingsLtd Tell Us?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 1.1%. The amount of capital employed has increased too, by 70%. 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.

The Bottom Line On Shenzhen Yan Tian Port HoldingsLtd's ROCE

To sum it up, Shenzhen Yan Tian Port HoldingsLtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Astute investors may have an opportunity here because the stock has declined 26% in the last five years. So researching this company further and determining whether or not these trends will continue seems justified.

If you want to know some of the risks facing Shenzhen Yan Tian Port HoldingsLtd we've found 2 warning signs (1 can't be ignored!) that you should be aware of before investing here.

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.