What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Micro-Tech (Nanjing)Ltd (SHSE:688029) 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?
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 Micro-Tech (Nanjing)Ltd:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = CN¥499m ÷ (CN¥4.4b - CN¥518m) (Based on the trailing twelve months to March 2024).
So, Micro-Tech (Nanjing)Ltd has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 6.3% generated by the Medical Equipment industry.
SHSE:688029 Return on Capital Employed June 20th 2024
In the above chart we have measured Micro-Tech (Nanjing)Ltd's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Micro-Tech (Nanjing)Ltd .
The Trend Of ROCE
On the surface, the trend of ROCE at Micro-Tech (Nanjing)Ltd doesn't inspire confidence. Over the last five years, returns on capital have decreased to 13% from 31% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.
On a related note, Micro-Tech (Nanjing)Ltd has decreased its current liabilities to 12% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. 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 Micro-Tech (Nanjing)Ltd's ROCE
In summary, despite lower returns in the short term, we're encouraged to see that Micro-Tech (Nanjing)Ltd is reinvesting for growth and has higher sales as a result. And there could be an opportunity here if other metrics look good too, because the stock has declined 69% in the last three years. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.
On a separate note, we've found 1 warning sign for Micro-Tech (Nanjing)Ltd you'll probably want to know about.
While Micro-Tech (Nanjing)Ltd 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
長期にわたって価値が増える株を特定するには、どのようなトレンドに注目すべきでしょうか？通常、増加傾向にある資本のトレンドに注目したいと思います。つまり、これらのビジネスタイプは複利計算機械であり、利益を連続的に再投資して、より高い利回りで成長を続けています。それはと言って、McCormick（NYSE：MKC）について第一印象で収益のトレンドを見ても、どのように増加しているかにはあまり張り付いていませんが、もう少し詳しく見てみましょう。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日新規買に使用する資本。基本的に、企業は再投資できる利益のある取り組みを持っています。これは、複利機械の特徴です。しかし、私たちはMicro-Tech（南京）株式会社（SHSE：688029）がどのようにリターンの傾向にあるかについて、初めに見たとき、椅子から飛び降りたわけではありませんが、より深く見てみましょう。
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。
