The Returns At Beijing Capital Eco-Environment Protection Group (SHSE:600008) Aren't Growing

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. Having said that, from a first glance at Beijing Capital Eco-Environment Protection Group (SHSE:600008) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Beijing Capital Eco-Environment Protection Group is:

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

0.053 = CN¥4.3b ÷ (CN¥110b - CN¥29b) (Based on the trailing twelve months to September 2024).

Therefore, Beijing Capital Eco-Environment Protection Group has an ROCE of 5.3%. On its own, that's a low figure but it's around the 6.2% average generated by the Water Utilities industry.

Check out our latest analysis for Beijing Capital Eco-Environment Protection Group

Above you can see how the current ROCE for Beijing Capital Eco-Environment Protection Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Beijing Capital Eco-Environment Protection Group .

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Beijing Capital Eco-Environment Protection Group. The company has employed 43% more capital in the last five years, and the returns on that capital have remained stable at 5.3%. 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.

In Conclusion...

As we've seen above, Beijing Capital Eco-Environment Protection Group's returns on capital haven't increased but it is reinvesting in the business. Unsurprisingly, the stock has only gained 27% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

On a final note, we found 3 warning signs for Beijing Capital Eco-Environment Protection Group (2 are a bit unpleasant) you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.