Why Shenzhen RongDa Photosensitive Science & Technology (SZSE:300576) Is Struggling to Impress: Analyzing Declining Returns and Future Prospects

Identifying the next successful investment can be exciting yet tricky. There are key indicators to look out for. First, we want to see a strong and growing return on capital employed (ROCE). Second, an expanding base of capital employed is essential. This shows that a company has profitable projects it can reinvest in—essentially a sign of a growth engine. That’s why we were pleased to check out Shenzhen RongDa Photosensitive Science & Technology (SZSE:300576) and its ROCE trend.

What Is Return On Capital Employed (ROCE)?

ROCE is a way to measure how well a company is using its capital to generate profits. Analysts calculate it using this formula:

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

For Shenzhen RongDa Photosensitive Science & Technology, the calculation is:

0.11 = CN¥145m ÷ (CN¥1.8b – CN¥382m) (As of September 2024).

So, Shenzhen RongDa’s ROCE stands at 11%. While this return is typical, it’s better than the 5.5% average for the Chemicals industry.

Looking at historical performance helps when studying stocks. You can see Shenzhen RongDa’s ROCE over the years above. For deeper insights into past earnings, we have free graphs that show revenue and cash flow for Shenzhen RongDa.

How Is ROCE Trending for Shenzhen RongDa?

The ROCE trend for Shenzhen RongDa is stable. For the last five years, the company has consistently delivered an 11% return while its capital employed has increased by 200%. This steady performance might seem dull but can be rewarding for long-term investors.

The Bottom Line

In short, Shenzhen RongDa Photosensitive Science & Technology continues to reinvest capital effectively, maintaining decent returns. Long-term investors have enjoyed a 280% return over the last five years. However, despite these promising signs, it’s wise to do more research before investing.

As with any investment, there are risks. We’ve spotted 1 warning sign you should keep in mind. While Shenzhen RongDa may not offer the highest returns, there are other companies out there achieving over 25% return on equity. You can find that free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts. Our articles aren’t meant to be financial advice. They do not recommend buying or selling stocks and do not consider your financial situation. Our goal is to offer long-term analysis based on solid data. Be aware that our analysis may not include the most recent company announcements. Simply Wall St does not hold shares in any of the stocks mentioned.