Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. So when we looked at Shenzhen Yan Tian Port HoldingsLtd (SZSE:000088) and its trend of ROCE, we really liked what we saw.

What Is 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. To calculate this metric for Shenzhen Yan Tian Port HoldingsLtd, this is the formula:

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

0.011 = CN¥183m ÷ (CN¥17b - CN¥883m) (Based on the trailing twelve months to September 2023).

Therefore, Shenzhen Yan Tian Port HoldingsLtd has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 4.9%.

Check out our latest analysis for Shenzhen Yan Tian Port HoldingsLtd

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shenzhen Yan Tian Port HoldingsLtd's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Shenzhen Yan Tian Port HoldingsLtd, check out these free graphs here.

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 1.1%. The amount of capital employed has increased too, by 70%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Shenzhen Yan Tian Port HoldingsLtd's ROCE

To sum it up, Shenzhen Yan Tian Port HoldingsLtd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Considering the stock has delivered 3.6% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

One more thing: We've identified 2 warning signs with Shenzhen Yan Tian Port HoldingsLtd (at least 1 which can't be ignored) , and understanding these would certainly be useful.

While Shenzhen Yan Tian Port HoldingsLtd 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.