CITIC Offshore Helicopter (SZSE:000099) Hasn't Managed To Accelerate Its Returns

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at CITIC Offshore Helicopter (SZSE:000099), it didn't seem to tick all of these boxes.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for CITIC Offshore Helicopter, this is the formula:

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

0.056 = CN¥330m ÷ (CN¥6.4b - CN¥538m) (Based on the trailing twelve months to March 2024).

Thus, CITIC Offshore Helicopter has an ROCE of 5.6%. In absolute terms, that's a low return and it also under-performs the Logistics industry average of 7.1%.

See our latest analysis for CITIC Offshore Helicopter

In the above chart we have measured CITIC Offshore Helicopter'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 CITIC Offshore Helicopter .

What The Trend Of ROCE Can Tell Us

In terms of CITIC Offshore Helicopter's historical ROCE trend, it doesn't exactly demand attention. The company has employed 23% more capital in the last five years, and the returns on that capital have remained stable at 5.6%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

The Bottom Line On CITIC Offshore Helicopter's ROCE

Long story short, while CITIC Offshore Helicopter has been reinvesting its capital, the returns that it's generating haven't increased. 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. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

On a separate note, we've found 1 warning sign for CITIC Offshore Helicopter you'll probably want to know about.

While CITIC Offshore Helicopter 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.