If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Yinsheng Digifavor (HKG:3773) and its trend of ROCE, we really liked what we saw.
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Yinsheng Digifavor is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = CN¥42m ÷ (CN¥491m - CN¥180m) (Based on the trailing twelve months to June 2024).
So, Yinsheng Digifavor has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Wireless Telecom industry average of 11% it's much better.
View our latest analysis for Yinsheng Digifavor
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Yinsheng Digifavor's past further, check out this free graph covering Yinsheng Digifavor's past earnings, revenue and cash flow.
We're delighted to see that Yinsheng Digifavor is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 13% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Yinsheng Digifavor is utilizing 65% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
To the delight of most shareholders, Yinsheng Digifavor has now broken into profitability. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Yinsheng Digifavor can keep these trends up, it could have a bright future ahead.
One more thing, we've spotted 1 warning sign facing Yinsheng Digifavor that you might find interesting.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
If you're looking to trade Yinsheng Digifavor, open an account with the lowest-cost platform trusted by professionals, Interactive Brokers.
With clients in over 200 countries and territories, and access to 160 markets, IBKR lets you trade stocks, options, futures, forex, bonds and funds from a single integrated account.
Enjoy no hidden fees, no account minimums, and FX conversion rates as low as 0.03%, far better than what most brokers offer.
Sponsored ContentWe've created the ultimate portfolio companion for stock investors, and it's free.
• Connect an unlimited number of Portfolios and see your total in one currency• Be alerted to new Warning Signs or Risks via email or mobile• Track the Fair Value of your stocks
Try a Demo Portfolio for FreeHave 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.
免責聲明:投資有風險,本文並非投資建議,以上內容不應被視為任何金融產品的購買或出售要約、建議或邀請,作者或其他用戶的任何相關討論、評論或帖子也不應被視為此類內容。本文僅供一般參考,不考慮您的個人投資目標、財務狀況或需求。TTM對信息的準確性和完整性不承擔任何責任或保證,投資者應自行研究並在投資前尋求專業建議。