Returns on Capital Paint A Bright Future For Anhui Conch Cement (HKG:914)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. And in light of that, the trends we're seeing at Anhui Conch Cement's (HKG:914) look very promising so lets take a look.

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. Analysts use this formula to calculate it for Anhui Conch Cement:

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

0.24 = CN¥43b ÷ (CN¥203b - CN¥21b) (Based on the trailing twelve months to March 2021).

Therefore, Anhui Conch Cement has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Basic Materials industry average of 14%.

Check out our latest analysis for Anhui Conch Cement

Above you can see how the current ROCE for Anhui Conch Cement 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 Anhui Conch Cement here for free.

The Trend Of ROCE

Anhui Conch Cement is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 106% more capital is being employed now too. So we're very much inspired by what we're seeing at Anhui Conch Cement thanks to its ability to profitably reinvest capital.

Our Take On Anhui Conch Cement's ROCE

All in all, it's terrific to see that Anhui Conch Cement is reaping the rewards from prior investments and is growing its capital base. And a remarkable 128% total return over the last five years 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 Anhui Conch Cement can keep these trends up, it could have a bright future ahead.

One final note, you should learn about the 2 warning signs we've spotted with Anhui Conch Cement (including 1 which is significant) .

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.
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