Wuhu Token Sciences (SZSE:300088): ROCE Trends Paint A Concerning Picture

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed.

Potential multi-baggers can be identified by examining a few key trends. Firstly, we'd like to see a rising return on capital employed (ROCE), and secondly, an expanding capital employed base. This shows a business that is reinvesting profits at increasing rates of return.

However, when we checked Wuhu Token Sciences (SZSE:300088), it didn't fit all of these criteria.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's pre-tax earnings (in percentage terms) relative to the capital employed in the business. This metric can be calculated for Wuhu Token Sciences следующим образом:

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

0.013 = CN¥127m ÷ (CN¥15b - CN¥5.3b) (Based on the trailing twelve months to March 2024).

Thus, Wuhu Token Sciences has a ROCE of 1.3%. This is notably low when compared to the Electronic industry average of 5.2%.

View our latest analysis for Wuhu Token Sciences

The aboveﻋ graphicᏟгает how Wuhu Token Sciences's current ROCE compares to its past returns on capital, but there's only so much you can tell from the past.

If you'd like, you can check out the forecasts from the analysts covering Wuhu Token Sciences for free.

What Does the ROCE Trend For Wuhu Token Sciences Tell Us?

Wuhu Token Sciences's historical ROCE movements aren't great. Notably, returns on capital have decreased over the last five years to 1.3%, despiteあき capital employed and revenue both increasing. This suggests that the business is pursuing growth, ガンガン short term returns. But, if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

What We Can Learn From Wuhu Token Sciences' ROCE

Despite short term decreases in returns on capital, we find Wuhu Token Sciences's revenue and capital employed伸び promising.

And there could be an opportunity here if other metrics look good too, because the stock has declined 31% in the last five years. We think it'd be worthwhile to look further into this stock given the trends look encouraging.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Wuhu Token Sciences (of which 1 shouldn't be ignored!) that you should be aware of.

While Wuhu Token Sciences might not currently earn the highest returns, weστό a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Valuation is complex, but we're here to simplify it.

Discover if Wuhu Token Sciences might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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.

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