Returns Are Gaining Momentum At Logory Logistics Technology (HKG:2482)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Logory Logistics Technology's (HKG:2482) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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 Logory Logistics Technology is:

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

0.084 = CN¥61m ÷ (CN¥2.7b - CN¥2.0b) (Based on the trailing twelve months to December 2024).

Thus, Logory Logistics Technology has an ROCE of 8.4%. Even though it's in line with the industry average of 7.9%, it's still a low return by itself.

Check out our latest analysis for Logory Logistics Technology

Historical performance is a great place to start when researching a stock so above you can see the gauge for Logory Logistics Technology's ROCE against it's prior returns. If you'd like to look at how Logory Logistics Technology has performed in the past in other metrics, you can view this free graph of Logory Logistics Technology's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. The data shows that returns on capital have increased substantially over the last five years to 8.4%. The amount of capital employed has increased too, by 281%. So we're very much inspired by what we're seeing at Logory Logistics Technology thanks to its ability to profitably reinvest capital.

One more thing to note, Logory Logistics Technology has decreased current liabilities to 74% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance. However, current liabilities are still at a pretty high level, so just be aware that this can bring with it some risks.

What We Can Learn From Logory Logistics Technology's ROCE

All in all, it's terrific to see that Logory Logistics Technology 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 16% return over the last year. 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.

On a separate note, we've found 1 warning sign for Logory Logistics Technology you'll probably want to know about.

While Logory Logistics Technology 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.