To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Although, when we looked at Jiangsu Rijiu Optoelectronics (SZSE:003015), it didn't seem to tick all of these boxes.
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 Jiangsu Rijiu Optoelectronics is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.012 = CN¥12m ÷ (CN¥1.3b - CN¥281m) (Based on the trailing twelve months to September 2023).
Thus, Jiangsu Rijiu Optoelectronics has an ROCE of 1.2%. Ultimately, that's a low return and it under-performs the Electronic industry average of 5.1%.
View our latest analysis for Jiangsu Rijiu Optoelectronics
SZSE:003015 Return on Capital Employed November 7th 2023
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 Jiangsu Rijiu Optoelectronics, check out these free graphs here.
The Trend Of ROCE
In terms of Jiangsu Rijiu Optoelectronics' historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 18% over the last five years. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line
In summary, Jiangsu Rijiu Optoelectronics is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 26% in the last three years. 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.
If you want to know some of the risks facing Jiangsu Rijiu Optoelectronics we've found 5 warning signs (3 are concerning!) that you should be aware of before investing here.
While Jiangsu Rijiu Optoelectronics 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.
マルチバッガー株を見つけるには、ビジネスにおいて探すべき基本的な傾向は何ですか?そのうちの一つに、資本運用の成長による投資利益率(ROCE)の増加、次に、資本運用額の拡大があります。具体的には、このタイプの企業は複利計算機であり、つまり、利益を常に高い利回りで再投資しています。しかし、江蘇日久光電(シンセン証券取引所:003015)を見てみると、全てに該当しているようには見えませんでした。投資された資本の利回り(ROCE)が増加していること、さらには資本運用額が増加していることが必要です。つまり、これらのタイプのビジネスは復利式計算機であり、利益を常により高い利回りで再投資していることを意味します。資本運用の利回り(ROCE)とは、会社がビジネスに投資した資本から生み出した収益(税引前利益)を測定するものです。江蘇日久光電についての計算式は、 Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)、落後している点があります。江蘇日久光電のROCEは1.2%です。つまり、低い利回りであり、電子業界の平均(5.1%)よりも株主にとって最適な投資ではない可能性があります。投下された資本に対する収益(ROCE)が増加していること、さらには投下された資本額が拡大していることが必要です。つまり、このタイプのビジネスは、利益を高い利回りで再投資し続ける複利計算機です。投資された資本額の増加があることが必要です。すなわち、これらタイプのビジネスは、高い利回りで利益を再投資し続ける複利計算機であるためです。江蘇省リジウオプトエレクトロニクス(SZSE:003015)について見てみると、該当する要件が完全に揃っているわけではないようです。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。
オーストラリアでは、moomooの投資商品及びサービスはMoomoo Securities Australia Limitedによって提供され、オーストラリア証券投資委員会(ASIC)の管理を受けております(AFSL No. 224663)。「金融サービスガイド」、「利用規約」、「プライバシーポリシー」などの詳細は、Moomoo Securities Australia Limitedのウェブサイトhttps://www.moomoo.com/auでご確認いただけます。