Returns Are Gaining Momentum At Beijing Enterprises Clean Energy Group (HKG:1250)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. So when we looked at Beijing Enterprises Clean Energy Group (HKG:1250) and its trend of ROCE, we really liked what we saw.

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 Beijing Enterprises Clean Energy Group:

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

0.054 = HK$2.2b ÷ (HK$57b - HK$17b) (Based on the trailing twelve months to December 2020).

So, Beijing Enterprises Clean Energy Group has an ROCE of 5.4%. Ultimately, that's a low return and it under-performs the Renewable Energy industry average of 7.0%.

Check out our latest analysis for Beijing Enterprises Clean Energy Group

Above you can see how the current ROCE for Beijing Enterprises Clean Energy Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Beijing Enterprises Clean Energy Group.

So How Is Beijing Enterprises Clean Energy Group's ROCE Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 5.4%. The amount of capital employed has increased too, by 1,653%. So we're very much inspired by what we're seeing at Beijing Enterprises Clean Energy Group thanks to its ability to profitably reinvest capital.

Our Take On Beijing Enterprises Clean Energy Group's ROCE

All in all, it's terrific to see that Beijing Enterprises Clean Energy Group is reaping the rewards from prior investments and is growing its capital base. Given the stock has declined 66% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. With that in mind, we believe the promising trends warrant this stock for further investigation.

One final note, you should learn about the 2 warning signs we've spotted with Beijing Enterprises Clean Energy Group (including 1 which is a bit concerning) .

While Beijing Enterprises Clean Energy Group 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.
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