If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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. However, after investigating ACM Research (Shanghai) (SHSE:688082), we don't think it's current trends fit the mold of a multi-bagger.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for ACM Research (Shanghai):
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.11 = CN¥767m ÷ (CN¥10b - CN¥3.1b) (Based on the trailing twelve months to March 2024).
Therefore, ACM Research (Shanghai) has an ROCE of 11%. In absolute terms, that's a satisfactory return, but compared to the Semiconductor industry average of 3.9% it's much better.
Above you can see how the current ROCE for ACM Research (Shanghai) 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 ACM Research (Shanghai) for free.
What The Trend Of ROCE Can Tell Us
Unfortunately, the trend isn't great with ROCE falling from 24% five years ago, while capital employed has grown 1,755%. That being said, ACM Research (Shanghai) raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. It's unlikely that all of the funds raised have been put to work yet, so as a consequence ACM Research (Shanghai) might not have received a full period of earnings contribution from it. Additionally, we found that ACM Research (Shanghai)'s most recent EBIT figure is around the same as the prior year, so we'd attribute the drop in ROCE mostly to the capital raise.
On a related note, ACM Research (Shanghai) has decreased its current liabilities to 30% 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. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.
Our Take On ACM Research (Shanghai)'s ROCE
Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for ACM Research (Shanghai). These growth trends haven't led to growth returns though, since the stock has fallen 34% over the last year. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.
One more thing: We've identified 2 warning signs with ACM Research (Shanghai) (at least 1 which makes us a bit uncomfortable) , and understanding them would certainly be useful.
While ACM Research (Shanghai) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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.
潜在的なマルチバッガーを見つけたい場合、しばしば根底にある動向が示唆を与えることがあります。通常、資本雇用率(ROCE)が成長傾向にあることに注目し、その上、資本雇用の基盤が拡大していることを知りたいと思うでしょう。これにより、企業は引き続き収益を事業に再投資し、より高いリターンを生み出すことができるため、複利マシンであることがわかります。そこで、Century Aluminum(NASDAQ:CENX)とそのROCEの傾向を見たとき、私たちは本当に気に入りました。資本利回り (ROCE)とは何ですか?わからない方には、ROCEは企業が事業に使用する資本から、税引き前利益をどれだけ生成できるかを測定します。アナリストは以下の式を使用して、Bumi Armada BerhadのROCEを計算します。「ROCE = 利息や税金を除いた利益 (EBIT) ÷ (総資産 - 流動負債)」。増え続ける売上高(revenue)はROCEのトレンドの中にあります。このように見ると、優れたビジネスモデルと豊富な収益性の高い再投資機会を持つ企業であることを示しています。しかし、Clearway Energy(NYSE:CWEN.A)を調査した結果、現在のトレンドが多倍化の形に合致していないと判断されました。NYSE:HD Return on Capital Employed 2024年4月10日これを見ると、多くの収益を再投資できる優れたビジネスモデルを持つ会社です。ACMリサーチ(上海)(SHSE:688082)を調査した後、現在のトレンドは多倍化に適していないと考えています。
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。
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。