What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Having said that, from a first glance at Zhejiang Lante Optics (SHSE:688127) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
Return On Capital Employed (ROCE): What Is It?
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. The formula for this calculation on Zhejiang Lante Optics is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.06 = CN¥95m ÷ (CN¥1.7b - CN¥101m) (Based on the trailing twelve months to March 2022).
Therefore, Zhejiang Lante Optics has an ROCE of 6.0%. Ultimately, that's a low return and it under-performs the Electronic industry average of 7.9%.
Check out our latest analysis for Zhejiang Lante Optics
SHSE:688127 Return on Capital Employed August 28th 2022
Above you can see how the current ROCE for Zhejiang Lante Optics 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 Zhejiang Lante Optics here for free.
So How Is Zhejiang Lante Optics' ROCE Trending?
When we looked at the ROCE trend at Zhejiang Lante Optics, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 6.0% from 22% five years ago. However it looks like Zhejiang Lante Optics might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.
On a related note, Zhejiang Lante Optics has decreased its current liabilities to 6.0% of total assets. That could partly explain why the ROCE has dropped. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.
Our Take On Zhejiang Lante Optics' ROCE
In summary, Zhejiang Lante Optics is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And in the last year, the stock has given away 11% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.
Zhejiang Lante Optics does come with some risks though, we found 3 warning signs in our investment analysis, and 1 of those shouldn't be ignored...
While Zhejiang Lante Optics 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
我們應該尋找哪些早期趨勢來識別一隻可能在長期內成倍增值的股票？通常，我們會注意到一種增長的趨勢退貨關於已使用資本(ROCE)以及與之相伴隨的是不斷擴大的基地已動用資本的比例。簡而言之，這些類型的企業是複利機器，這意味着它們不斷地以越來越高的回報率對收益進行再投資。話雖如此，從第一眼看浙江朗特光學(上海證券交易所：688127)我們不會因為回報率的趨勢而從椅子上跳起來，但讓我們更深入地看看。
資本回報率(ROCE)：它是什麼？
對於那些不知道的人來説，ROCE是一家公司的年度税前利潤(其回報)相對於業務資本的衡量標準。浙江藍天光學的計算公式為：
已動用資本回報率=息税前收益(EBIT)？(總資產-流動負債)
0.06=CN元9500萬？(CN元17億元-CN元1.01億元)(根據截至2022年3月的往績12個月計算).
所以呢，浙江朗特光學的淨資產收益率為6.0%。歸根結底，這是一個低迴報率，低於7.9%的電子行業平均水平。
查看我們對浙江藍特光學的最新分析
上證所：2022年8月28日資本回報率688127
上圖中，你可以看到浙江藍特光學目前的淨資產收益率與之前的資本回報率相比如何，但從過去你只能看出這麼多。如果你願意，你可以在這裏查看浙江蘭特光學公司分析師的預測免費的。
那麼，浙江藍特光學的ROCE趨勢如何？
當我們觀察浙江藍特光學的ROCE趨勢時，我們並沒有獲得太多信心。過去五年，資本回報率從五年前的22%降至6.0%。然而，看起來浙江藍特光學可能正在為長期增長進行再投資，因為儘管已動用的資本有所增加，但該公司的銷售額在過去12個月裏沒有太大變化。該公司可能需要一段時間才能開始看到這些投資帶來的收益變化。
與此相關的是，浙江藍特光學已將流動負債降至總資產的6.0%。這可能在一定程度上解釋了ROCE下降的原因。更重要的是，這可以降低業務的某些方面的風險，因為現在該公司的供應商或短期債權人為其運營提供的資金減少了。一些人會説，這降低了企業產生淨資產收益率的效率，因為它現在用自己的錢為更多的運營提供資金。
我們對浙江朗特光學公司ROCE的看法
總而言之，浙江藍特光學正在將資金重新投資到業務中，以實現增長，但不幸的是，銷售額似乎還沒有增加多少。去年，該股下跌了11%，因此市場看起來對這些趨勢不會很快走強抱太大希望。無論如何，這隻股票不具備上面討論的多袋子股票的這些特徵，所以如果這就是你正在尋找的，我們認為你在其他地方會有更多的運氣。
不過，我們發現，浙江藍特光學確實存在一些風險在我們的投資分析中出現了3個警告信號，其中一個是不應該被忽視的。
儘管浙江藍特光學目前的回報率可能不是最高的，但我們編制了一份目前股本回報率超過25%的公司名單。看看這個免費在這裏列出。
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本文由Simply Wall St.撰寫，具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論，我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議，也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意，我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。
