If you’re not sure where to start when looking for your next multibagger, there are some important trends to look out for. Ideally, your business will see two trends.grow first return One is capital employed (ROCE) and the second is increasing. amount of capital employed. If you see this, it usually means the company has a good business model and plenty of opportunities for profitable reinvestment. But when we saw Dalian Zhuma Stone Precision Technology (SZSE:301007), doesn’t seem to check all of these boxes.
Return on Capital Employed (ROCE): What is it?
In case you aren’t familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. To calculate this metric for Dalian Demaishi Precision Technology, use the following formula:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.068 = 46 million CN ÷ (1 billion CN – 329 million CN) (Based on the previous 12 months to September 2023).
So, Dalian Demaishi Precision Technology’s ROCE is 6.8%. This alone is a low return on equity, but it’s comparable to the industry’s average return of 6.6%.
Check out our latest analysis for Dalian Demaishi Precision Technology.
Past performance is a great starting point when researching a stock. So, above, you can see his ROCE metrics for Dalian Dema Stone Precision Technology’s past returns. Click here to learn more about past earnings. free A graph detailing Dalian Demaishi Precision Technology’s earnings and cash flow performance.
What can we learn from Dalian Demi Precision Technology’s ROCE trends?
The ROCE trend isn’t great. This is because the capital employed by companies has fallen from 16% five years ago, while he increased by 114%. However, some of the increase in capital employed may be due to recent capital raisings completed before the most recent reporting period, so keep that in mind when looking at the decrease in ROCE. The funds raised are likely not utilized yet, so it’s worth keeping an eye on what happens to Dalian Demi Precision Precision Technology’s earnings going forward, and whether they change as a result of the capital raise.
On a related note, Dalian Dema Stone Precision Technology reduced current liabilities to 33% of total assets. So we can attribute some of this to his decreasing ROCE. This effectively means that suppliers and short-term creditors reduce funding for the business, reducing some of the risk factors. Since companies essentially self-finance much of their business operations, we can say that this reduces the company’s ROCE generation efficiency.
Main points of ROCE of Dalian Demi Precision Technology
In summary, although earnings are low in the short term, it is encouraging to see that Dalian Demi Precision Precision Technology is reinvesting for growth, and as a result, sales are increasing. Additionally, the stock price is up 9.3% over the past year, suggesting investors are optimistic about the future. So if this growth trend continues, we’ll be optimistic about the stock’s future.
One last thing to note. two warning signs I found them at Dalian Demaishi Precision Technology (one of them is a little uncomfortable).
Dalian Demaishi Precision Technology isn’t the highest earner, but check this out. free A list of companies with solid balance sheets and high return 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
