Returns On Capital At Fu Shou Yuan International Group (HKG:1448) Have Stalled

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, the ROCE of Fu Shou Yuan International Group (HKG:1448) looks decent, right now, so lets see what the trend of returns can tell us.

What Is Return On Capital Employed (ROCE)?

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 Fu Shou Yuan International Group is:

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

0.15 = CN¥938m ÷ (CN¥7.4b - CN¥943m) (Based on the trailing twelve months to June 2022).

So, Fu Shou Yuan International Group has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 8.7% generated by the Consumer Services industry.

View our latest analysis for Fu Shou Yuan International Group

In the above chart we have measured Fu Shou Yuan International Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Fu Shou Yuan International Group here for free.

What The Trend Of ROCE Can Tell Us

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has employed 75% more capital in the last five years, and the returns on that capital have remained stable at 15%. 15% is a pretty standard return, and it provides some comfort knowing that Fu Shou Yuan International Group has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

In Conclusion...

To sum it up, Fu Shou Yuan International Group has simply been reinvesting capital steadily, at those decent rates of return. In light of this, the stock has only gained 11% over the last five years for shareholders who have owned the stock in this period. So to determine if Fu Shou Yuan International Group is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.

While Fu Shou Yuan International Group doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation on our platform.

While Fu Shou Yuan International Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.