The Returns At Wintime Energy GroupLtd (SHSE:600157) Aren't Growing

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. 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 briefly looking over the numbers, we don't think Wintime Energy GroupLtd (SHSE:600157) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. The formula for this calculation on Wintime Energy GroupLtd is:

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

0.066 = CN¥5.7b ÷ (CN¥107b - CN¥20b) (Based on the trailing twelve months to March 2024).

Thus, Wintime Energy GroupLtd has an ROCE of 6.6%. In absolute terms, that's a low return but it's around the Renewable Energy industry average of 5.9%.

See our latest analysis for Wintime Energy GroupLtd

In the above chart we have measured Wintime Energy 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 Wintime Energy GroupLtd .

What Can We Tell From Wintime Energy GroupLtd's ROCE Trend?

The returns on capital haven't changed much for Wintime Energy GroupLtd in recent years. Over the past five years, ROCE has remained relatively flat at around 6.6% and the business has deployed 41% more capital into its operations. 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.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 19% of total assets, is good to see from a business owner's perspective. 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

As we've seen above, Wintime Energy GroupLtd's returns on capital haven't increased but it is reinvesting in the business. Since the stock has declined 21% over the last five years, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think Wintime Energy GroupLtd has the makings of a multi-bagger.

Wintime Energy GroupLtd could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 600157 on our platform quite valuable.

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.