The Returns At Shandong Weigao Group Medical Polymer (HKG:1066) Aren't Growing

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, the ROCE of Shandong Weigao Group Medical Polymer (HKG:1066) looks decent, right now, so lets see what the trend of returns can tell us.

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

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 Shandong Weigao Group Medical Polymer is:

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

0.11 = CN¥3.0b ÷ (CN¥33b - CN¥5.9b) (Based on the trailing twelve months to December 2022).

So, Shandong Weigao Group Medical Polymer has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Medical Equipment industry average of 10.0%.

See our latest analysis for Shandong Weigao Group Medical Polymer

In the above chart we have measured Shandong Weigao Group Medical Polymer's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Shandong Weigao Group Medical Polymer.

SWOT Analysis for Shandong Weigao Group Medical Polymer

How Are Returns Trending?

While the current returns on capital are decent, they haven't changed much. The company has employed 88% more capital in the last five years, and the returns on that capital have remained stable at 11%. 11% is a pretty standard return, and it provides some comfort knowing that Shandong Weigao Group Medical Polymer 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.

The Key Takeaway

In the end, Shandong Weigao Group Medical Polymer has proven its ability to adequately reinvest capital at good rates of return. On top of that, the stock has rewarded shareholders with a remarkable 189% return to those who've held over the last five years. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Shandong Weigao Group Medical Polymer could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

While Shandong Weigao Group Medical Polymer isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.