If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, 9F (NASDAQ:JFU) looks quite promising in regards to its trends of return on capital.
What Is Return On Capital Employed (ROCE)?
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for 9F, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.014 = CN¥53m ÷ (CN¥4.4b - CN¥526m) (Based on the trailing twelve months to June 2025).
So, 9F has an ROCE of 1.4%. In absolute terms, that's a low return and it also under-performs the Interactive Media and Services industry average of 6.2%.
Check out our latest analysis for 9F
Historical performance is a great place to start when researching a stock so above you can see the gauge for 9F's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of 9F.
What The Trend Of ROCE Can Tell Us
Like most people, we're pleased that 9F is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 1.4% on their capital employed. Additionally, the business is utilizing 39% less capital than it was five years ago, and taken at face value, that can mean the company needs less funds at work to get a return. 9F could be selling under-performing assets since the ROCE is improving.
Our Take On 9F's ROCE
In a nutshell, we're pleased to see that 9F has been able to generate higher returns from less capital. However the stock is down a substantial 76% in the last five years so there could be other areas of the business hurting its prospects. Regardless, we think the underlying fundamentals warrant this stock for further investigation.
9F does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those is a bit concerning...
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.