If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Zhongxing Shenyang Commercial Building GroupLtd (SZSE:000715) and its ROCE trend, we weren't exactly thrilled.

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. 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)

0.048 = CN¥96m ÷ (CN¥2.6b - CN¥627m) (Based on the trailing twelve months to September 2024).

Therefore, Zhongxing Shenyang Commercial Building GroupLtd has an ROCE of 4.8%. In absolute terms, that's a low return, but it's much better than the Multiline Retail industry average of 3.9%.

In the above chart we have measured Zhongxing Shenyang Commercial Building GroupLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Zhongxing Shenyang Commercial Building GroupLtd .

So How Is Zhongxing Shenyang Commercial Building GroupLtd's ROCE Trending?

When we looked at the ROCE trend at Zhongxing Shenyang Commercial Building GroupLtd, we didn't gain much confidence. Around five years ago the returns on capital were 11%, but since then they've fallen to 4.8%. However it looks like Zhongxing Shenyang Commercial Building GroupLtd might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

The Bottom Line

In summary, Zhongxing Shenyang Commercial Building GroupLtd is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Since the stock has gained an impressive 51% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 2 warning signs for Zhongxing Shenyang Commercial Building GroupLtd (of which 1 doesn't sit too well with us!) that you should know about.

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.