Capital returns enter tricky times for China's nuclear energy technology (HKG:611)

If you want to spot potential multi-baggers, there are often underlying trends that can provide clues.grow first return Capital Employed (ROCE), and second, is increasing amount of capital employed. When you see this, it usually means a company with a good business model and plenty of profitable reinvestment opportunities.Based on that, we examine china nuclear energy technology (HKG:611) and its ROCE trend, we weren’t all that excited.

Return on Capital Employed (ROCE): What is it?

For those of you who don’t know, ROCE is a measure of a company’s annual pre-tax earnings (earnings) relative to the capital used in the business. Analysts calculate China Nuclear Energy Technology using the following formula:

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

0.058 = HK$239 million ÷ (HK$9.4 billion – HK$5.2 billion) (Based on the last 12 months to June 2022).

therefore, China Nuclear Energy Technology’s ROCE is 5.8%. That’s a low figure in itself, but it’s about 6.9%, which is the average for the construction industry.

Get the latest analysis on China nuclear energy technology

Historical performance is a great place to start when researching stocks, so you can check the above gauge of China Nuclear Energy Tech’s ROCE against previous returns. To learn more about China Nuclear Energy Technology’s historical earnings, earnings and cash flow, please visit here. freedom Click here for the graph.

What can be learned from ROCE trends in Chinese nuclear technology?

On the surface, China Nuclear Energy Technology’s ROCE trend does not inspire confidence. Specifically, ROCE has declined from 11% over the past five years. However, given that both revenues and the amount of assets used in the business are increasing, it may suggest that the company is investing in growth, and the extra capital is contributing to his ROCE. leading to a short-term decline in And if the increase in capital yields additional profits, the business, and thus the shareholders, will benefit in the long run.

Another thing to note is that China’s nuclear energy technology has a high current liability to total assets ratio of 56%. This could pose some risks, as the company is fundamentally reliant on suppliers and other types of short-term creditors to operate fairly heavily. While not necessarily a bad thing, the lower this ratio, the better.

Conclusion is…

Although China Nuclear Energy Technology’s recent earnings have been declining, it is good to see that sales are growing and the business is reinvesting in its business. But despite the encouraging trend, the stock has fallen 67% over the past five years, so astute investors may have an opportunity. As such, we recommend investigating this stock further to uncover what other fundamentals of the business indicate.

Finally, you should learn about: three warning signs We discovered China’s nuclear energy technology (including two related ones).

For those who love to invest solid company, check this out freedom List of companies with solid balance sheets and high return on equity.

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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …