What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Wus Printed Circuit (Kunshan) (SZSE:002463) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for Wus Printed Circuit (Kunshan), this is the formula:

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

0.15 = CN¥1.6b ÷ (CN¥15b - CN¥4.4b) (Based on the trailing twelve months to September 2023).

Thus, Wus Printed Circuit (Kunshan) has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 5.1% generated by the Electronic industry.

Above you can see how the current ROCE for Wus Printed Circuit (Kunshan) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Wus Printed Circuit (Kunshan).

What Can We Tell From Wus Printed Circuit (Kunshan)'s ROCE Trend?

Investors would be pleased with what's happening at Wus Printed Circuit (Kunshan). Over the last five years, returns on capital employed have risen substantially to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 136%. So we're very much inspired by what we're seeing at Wus Printed Circuit (Kunshan) thanks to its ability to profitably reinvest capital.

Our Take On Wus Printed Circuit (Kunshan)'s ROCE

In summary, it's great to see that Wus Printed Circuit (Kunshan) can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. Since the stock has returned a staggering 170% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Wus Printed Circuit (Kunshan) can keep these trends up, it could have a bright future ahead.

While Wus Printed Circuit (Kunshan) looks impressive, no company is worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 002463 is currently trading for a fair price.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns 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 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.