If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. In light of that, when we looked at Shanghai Jinjiang Shipping (Group) (SHSE:601083) and its ROCE trend, we weren't exactly thrilled.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Shanghai Jinjiang Shipping (Group), this is the formula:

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

0.089 = CN¥768m ÷ (CN¥10b - CN¥1.4b) (Based on the trailing twelve months to September 2024).

So, Shanghai Jinjiang Shipping (Group) has an ROCE of 8.9%. Even though it's in line with the industry average of 8.8%, it's still a low return by itself.

Historical performance is a great place to start when researching a stock so above you can see the gauge for Shanghai Jinjiang Shipping (Group)'s ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Shanghai Jinjiang Shipping (Group).

So How Is Shanghai Jinjiang Shipping (Group)'s ROCE Trending?

In terms of Shanghai Jinjiang Shipping (Group)'s historical ROCE movements, the trend isn't fantastic. Around one year ago the returns on capital were 20%, but since then they've fallen to 8.9%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. 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.

Our Take On Shanghai Jinjiang Shipping (Group)'s ROCE

In summary, Shanghai Jinjiang Shipping (Group) is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 23% in the last year. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you want to continue researching Shanghai Jinjiang Shipping (Group), you might be interested to know about the 1 warning sign that our analysis has discovered.

While Shanghai Jinjiang Shipping (Group) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.