There's Been No Shortage Of Growth Recently For Xinhua Winshare Publishing and Media's (HKG:811) Returns On Capital

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. 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, we've noticed some promising trends at Xinhua Winshare Publishing and Media (HKG:811) so let's look a bit deeper.

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 Xinhua Winshare Publishing and Media:

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

0.095 = CN¥1.3b ÷ (CN¥22b - CN¥8.2b) (Based on the trailing twelve months to March 2023).

Therefore, Xinhua Winshare Publishing and Media has an ROCE of 9.5%. On its own that's a low return, but compared to the average of 4.2% generated by the Retail Distributors industry, it's much better.

See our latest analysis for Xinhua Winshare Publishing and Media

Above you can see how the current ROCE for Xinhua Winshare Publishing and Media compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Xinhua Winshare Publishing and Media's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 9.5%. The amount of capital employed has increased too, by 53%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

Our Take On Xinhua Winshare Publishing and Media's ROCE

All in all, it's terrific to see that Xinhua Winshare Publishing and Media is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 58% return over the last five years. In light of that, we think it's worth looking further into this stock because if Xinhua Winshare Publishing and Media can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Xinhua Winshare Publishing and Media that you might find interesting.

While Xinhua Winshare Publishing and Media 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.