Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. However, after investigating Zhongxing Shenyang Commercial Building GroupLtd (SZSE:000715), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Zhongxing Shenyang Commercial Building GroupLtd is:

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

0.065 = CN¥125m ÷ (CN¥2.6b - CN¥651m) (Based on the trailing twelve months to September 2023).

Therefore, Zhongxing Shenyang Commercial Building GroupLtd has an ROCE of 6.5%. On its own that's a low return, but compared to the average of 5.3% generated by the Multiline Retail industry, it's much better.

Above you can see how the current ROCE for Zhongxing Shenyang Commercial Building GroupLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Zhongxing Shenyang Commercial Building GroupLtd .

How Are Returns Trending?

The returns on capital haven't changed much for Zhongxing Shenyang Commercial Building GroupLtd in recent years. The company has consistently earned 6.5% for the last five years, and the capital employed within the business has risen 25% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

What We Can Learn From Zhongxing Shenyang Commercial Building GroupLtd's ROCE

As we've seen above, Zhongxing Shenyang Commercial Building GroupLtd's returns on capital haven't increased but it is reinvesting in the business. And investors may be recognizing these trends since the stock has only returned a total of 37% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you want to continue researching Zhongxing Shenyang Commercial Building GroupLtd, you might be interested to know about the 1 warning sign that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.