Shandong Weigao Group Medical Polymer (HKG: 1066) Shareholders will want ROCE trajectory to continue
Did you know that certain financial measures can provide clues about a potential multi-bagger? First, we would like to identify a growth to recover on capital employed (ROCE) and at the same time, a based capital employed. Ultimately, this demonstrates that this is a company that is reinvesting its profits at increasing rates of return. So when we looked Shandong Weigao Group Medical Polymer (HKG: 1066) and its trend of ROCE, we really liked what we saw.
Understanding Return on Capital Employed (ROCE)
Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. To calculate this metric for Shandong Weigao Group medical polymer, here is the formula:
Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)
0.11 = CN ¥ 2.6b ÷ (CN ¥ 30b – CN ¥ 5.6b) (Based on the last twelve months up to June 2021).
So, Shandong Weigao Group Medical Polymer has a ROCE of 11%. That’s a relatively normal return on capital, and it’s around the 10% generated by the medical equipment industry.
See our latest review for Shandong Weigao Group Medical Polymer
Above, you can see how Shandong Weigao Group Medical Polymer’s current ROCE compares to its previous returns on equity, but there is little you can say about the past. If you’d like to see what analysts are forecasting for the future, you should check out our free report for Shandong Weigao Group’s medical polymer.
What does the ROCE trend tell us for the Shandong Weigao Group’s medical polymer?
Investors would be delighted with what happens at Shandong Weigao Group Medical Polymer. Over the past five years, returns on capital employed have increased substantially to 11%. Basically the business earns more per dollar of capital invested and on top of that 95% more capital is also used. So we are very inspired by what we see at Shandong Weigao Group Medical Polymer through its ability to reinvest capital profitably.
What we can learn from Shandong Weigao Group Medical Polymer’s ROCE
Overall, it is great to see that Shandong Weigao Group Medical Polymer is reaping the rewards of past investments and increasing its capital base. And with the stock having performed exceptionally well over the past five years, these trends are being taken into account by investors. In light of this, we believe it is worth taking a closer look at this title because if Shandong Weigao Group Medical Polymer can maintain these trends, he could have a bright future ahead of him.
One more thing to note, we have identified 1 warning sign with Shandong Weigao Group Medical Polymer and understanding this should be part of your investment process.
Although Shandong Weigao Group’s medical polymer does not generate the highest yield, check out this free list of companies that generate high returns on equity with strong balance sheets.
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