Returns On Capital At CECEP Wind-power CorporationLtd (SHSE:601016) Have Stalled

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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. Although, when we looked at CECEP Wind-power CorporationLtd (SHSE:601016), it didn't seem to tick all of these boxes.

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

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 CECEP Wind-power CorporationLtd is:

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

0.072 = CN¥2.6b ÷ (CN¥42b - CN¥4.8b) (Based on the trailing twelve months to September 2023).

Thus, CECEP Wind-power CorporationLtd has an ROCE of 7.2%. In absolute terms, that's a low return, but it's much better than the Renewable Energy industry average of 5.3%.

See our latest analysis for CECEP Wind-power CorporationLtd

Above you can see how the current ROCE for CECEP Wind-power CorporationLtd 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 CECEP Wind-power CorporationLtd .

The Trend Of ROCE

In terms of CECEP Wind-power CorporationLtd's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 7.2% and the business has deployed 96% 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.

What We Can Learn From CECEP Wind-power CorporationLtd's ROCE

As we've seen above, CECEP Wind-power CorporationLtd's returns on capital haven't increased but it is reinvesting in the business. And investors may be recognizing these trends since the stock has only returned a total of 20% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

If you'd like to know about the risks facing CECEP Wind-power CorporationLtd, we've discovered 2 warning signs that you should be aware of.

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.