Returns At Ningxia Western Venture IndustrialLtd (SZSE:000557) Appear To Be Weighed Down

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Ningxia Western Venture IndustrialLtd (SZSE:000557) and its ROCE trend, we weren't exactly thrilled.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Ningxia Western Venture IndustrialLtd is:

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

0.043 = CN¥256m ÷ (CN¥6.3b - CN¥359m) (Based on the trailing twelve months to March 2024).

Thus, Ningxia Western Venture IndustrialLtd has an ROCE of 4.3%. On its own that's a low return on capital but it's in line with the industry's average returns of 4.3%.

Check out our latest analysis for Ningxia Western Venture IndustrialLtd

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Ningxia Western Venture IndustrialLtd.

The Trend Of ROCE

There hasn't been much to report for Ningxia Western Venture IndustrialLtd's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Ningxia Western Venture IndustrialLtd to be a multi-bagger going forward.

The Bottom Line On Ningxia Western Venture IndustrialLtd's ROCE

We can conclude that in regards to Ningxia Western Venture IndustrialLtd's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 19% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Ningxia Western Venture IndustrialLtd could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 000557 on our platform quite valuable.

While Ningxia Western Venture IndustrialLtd 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.

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