Capital investment in Nanjing Cosmos Chemical (SZSE:300856) signals a promising future

If you’re not sure where to start when looking for your next multi-bagger, there are a few key trends to look at: Typically, you want to focus on growth trends. return Return on Invested Capital (ROCE) and associated expansion base That’s more than 20% of invested capital, which indicates a company that is reinvesting profits at a growing rate of return. Nanjing Cosmos Chemical (SZSE:300856) We were really pleased to see the ROCE trend.

What is Return on Invested Capital (ROCE)?

For those who don’t know, ROCE is the ratio of a company’s annual pre-tax profit (revenue) to the capital employed in the business. The formula for calculating this metric for Nanjing Cosmos Chemical is:

Return on Invested Capital = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)

0.24 = 870 million yuan ÷ (4.1 billion yuan – 453 million yuan) (Based on the trailing 12 months ending March 2024).

So, Nanjing Cosmos Chemical’s ROCE is 24%. In absolute terms, that’s an excellent return and better than the chemical industry average of 5.5%.

Check out our latest analysis for Nanjing Cosmos Chemical

The chart above compares Nanjing Cosmos Chemical’s historical ROCE with its past performance, but the future is arguably more important: if you want to see what analysts are predicting going forward you can take a look at this free analyst report on Nanjing Cosmos Chemical.

What does Nanjing Cosmos Chemical’s ROCE trend indicate?

It’s hard not to be impressed with Nanjing Cosmos Chemical’s return on capital. The company has deployed over 691% of its capital over the past five years, and its return on capital has remained steady at 24%. That kind of return is the envy of most companies, and it’s even better when you consider that the company is repeatedly reinvesting at this rate. If Nanjing Cosmos Chemical can keep up this trajectory, we’ll be very optimistic about the company’s future.

Incidentally, Nanjing Cosmos Chemical has managed to reduce its current liabilities to 11% of its total assets over the past five years, which means that it has fewer outstanding debts to suppliers and short-term creditors than before, eliminating some of the risks inherent in operating its business.

Nanjing Cosmos Chemical’s ROCE conclusion

In summary, we’re pleased to see that Nanjing Cosmos Chemical has been compounding profits by reinvesting at consistently high rates of return, a common characteristic of multi-baggers. On top of that, the stock has delivered an astounding 106% return to shareholders who held onto it over the past three years. Investors seem to be aware of these encouraging trends, but we still think the stock is worthy of further investigation.

Nanjing Cosmos Chemical faces several risks, Two Warning Signs in Investment Analysis And one of them is important…

If you’re looking for more stocks with high returns, check here. free A list of stocks with strong balance sheets and high return on equity.

Have feedback about this article? Concerns about the content? contact Please contact us directly. Or email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

Have feedback about this article? Concerns about the content? Contact us directly. Or email us at editorial-team@simplywallst.com