The Returns At Zhuzhou CRRC Times Electric (HKG:3898) Aren't Growing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. In light of that, when we looked at Zhuzhou CRRC Times Electric (HKG:3898) and its ROCE trend, we weren't exactly thrilled.

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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. Analysts use this formula to calculate it for Zhuzhou CRRC Times Electric:

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

0.084 = CN¥3.8b ÷ (CN¥69b - CN¥24b) (Based on the trailing twelve months to June 2025).

So, Zhuzhou CRRC Times Electric has an ROCE of 8.4%. Even though it's in line with the industry average of 7.8%, it's still a low return by itself.

Check out our latest analysis for Zhuzhou CRRC Times Electric

In the above chart we have measured Zhuzhou CRRC Times Electric'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 Zhuzhou CRRC Times Electric .

The Trend Of ROCE

There are better returns on capital out there than what we're seeing at Zhuzhou CRRC Times Electric. Over the past five years, ROCE has remained relatively flat at around 8.4% and the business has deployed 92% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

What We Can Learn From Zhuzhou CRRC Times Electric's ROCE

In conclusion, Zhuzhou CRRC Times Electric has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has gained an impressive 66% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

On a final note, we've found 1 warning sign for Zhuzhou CRRC Times Electric that we think you should be aware of.

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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.