What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at Cybrid Technologies (SHSE:603212) and its ROCE trend, we weren't exactly thrilled.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Cybrid Technologies, this is the formula:

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

0.038 = CN¥120m ÷ (CN¥5.1b - CN¥1.9b) (Based on the trailing twelve months to March 2024).

Therefore, Cybrid Technologies has an ROCE of 3.8%. Even though it's in line with the industry average of 4.2%, it's still a low return by itself.

Above you can see how the current ROCE for Cybrid Technologies compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Cybrid Technologies .

What Does the ROCE Trend For Cybrid Technologies Tell Us?

In terms of Cybrid Technologies' historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 3.8% from 16% five years ago. However it looks like Cybrid Technologies 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

To conclude, we've found that Cybrid Technologies is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 63% in the last three years. Therefore based on the analysis done in this article, we don't think Cybrid Technologies has the makings of a multi-bagger.

Cybrid Technologies could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 603212 on our platform quite valuable.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com