Returns At Shanghai Fudan Microelectronics Group (HKG:1385) Are On The Way Up

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Shanghai Fudan Microelectronics Group's (HKG:1385) returns on capital, so let's have a look.

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Understanding 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 Shanghai Fudan Microelectronics Group is:

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

0.069 = CN¥515m ÷ (CN¥9.3b - CN¥1.8b) (Based on the trailing twelve months to September 2025).

Thus, Shanghai Fudan Microelectronics Group has an ROCE of 6.9%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.9%.

View our latest analysis for Shanghai Fudan Microelectronics Group

Above you can see how the current ROCE for Shanghai Fudan Microelectronics Group 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 analyst report for Shanghai Fudan Microelectronics Group .

What Does the ROCE Trend For Shanghai Fudan Microelectronics Group Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 6.9%. The amount of capital employed has increased too, by 247%. So we're very much inspired by what we're seeing at Shanghai Fudan Microelectronics Group thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that Shanghai Fudan Microelectronics Group can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

While Shanghai Fudan Microelectronics Group looks impressive, no company is worth an infinite price. The intrinsic value infographic for 1385 helps visualize whether it is currently trading for a fair price.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.