Returns At JH Educational Technology (HKG:1935) Are On The Way Up

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in JH Educational Technology's (HKG:1935) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on JH Educational Technology is:

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

0.13 = CN¥287m ÷ (CN¥2.6b - CN¥443m) (Based on the trailing twelve months to December 2020).

Therefore, JH Educational Technology has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 8.1% generated by the Consumer Services industry.

See our latest analysis for JH Educational Technology

Above you can see how the current ROCE for JH Educational Technology compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering JH Educational Technology here for free.

What Can We Tell From JH Educational Technology's ROCE Trend?

We like the trends that we're seeing from JH Educational Technology. Over the last four years, returns on capital employed have risen substantially to 13%. Basically the business is earning more per dollar of capital invested and in addition to that, 118% more capital is being employed now too. So we're very much inspired by what we're seeing at JH Educational Technology thanks to its ability to profitably reinvest capital.

The Bottom Line On JH Educational Technology's ROCE

To sum it up, JH Educational Technology has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 130% total return over the last year tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if JH Educational Technology can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for JH Educational Technology that we think 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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