If you're looking for a multi-bagger, there's a few things to keep an eye out 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at China Railway Tielong Container Logistics (SHSE:600125) and its ROCE trend, we weren't exactly thrilled.

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 China Railway Tielong Container Logistics, this is the formula:

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

0.081 = CN¥687m ÷ (CN¥9.9b - CN¥1.4b) (Based on the trailing twelve months to September 2024).

Therefore, China Railway Tielong Container Logistics has an ROCE of 8.1%. On its own that's a low return, but compared to the average of 4.2% generated by the Transportation industry, it's much better.

Above you can see how the current ROCE for China Railway Tielong Container Logistics compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering China Railway Tielong Container Logistics for free.

The Trend Of ROCE

There hasn't been much to report for China Railway Tielong Container Logistics' returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if China Railway Tielong Container Logistics doesn't end up being a multi-bagger in a few years time.

The Bottom Line On China Railway Tielong Container Logistics' ROCE

In summary, China Railway Tielong Container Logistics isn't compounding its earnings but is generating stable returns on the same amount of capital employed. And investors may be recognizing these trends since the stock has only returned a total of 26% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

China Railway Tielong Container Logistics could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 600125 on our platform quite valuable.

While China Railway Tielong Container Logistics isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.