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'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Sichuan Fulin Transportation Group (SZSE:002357) 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?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Sichuan Fulin Transportation Group is:

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

0.036 = CN¥66m ÷ (CN¥2.8b - CN¥994m) (Based on the trailing twelve months to September 2023).

Thus, Sichuan Fulin Transportation Group has an ROCE of 3.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 3.8%.

See our latest analysis for Sichuan Fulin Transportation Group

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Sichuan Fulin Transportation Group, check out these free graphs here.

What Does the ROCE Trend For Sichuan Fulin Transportation Group Tell Us?

Over the past five years, Sichuan Fulin Transportation Group's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Sichuan Fulin Transportation Group doesn't end up being a multi-bagger in a few years time.

In Conclusion...

In a nutshell, Sichuan Fulin Transportation Group has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 21% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

Like most companies, Sichuan Fulin Transportation Group does come with some risks, and we've found 1 warning sign that you should be aware of.

While Sichuan Fulin Transportation Group 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.

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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.