Wuhu Token Sciences (SZSE:300088): We Don't Think It's A Multi-Bagger

Here are some key trends to identify if you're looking for the next multi-bagger. A typical approach is to try and find a company with increasing returns on capital employed (ROCE), together пункт a growing amount of capital employed. This ultimately shows a business that is reinvesting profits at increasing rates of return.

However, after a brief check on the numbers, we don't think Wuhu Token Sciences (SZSE:300088) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Wuhu Token Sciences:

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

0.014 = CN¥139m ÷ (CN¥16b - CN¥6.3b) (Based on the trailing twelve months to September 2024).

So, Wuhu Token Sciences has an ROCE of 1.4%. That's a low return and it under-performs the Electronic industry average of 5.5%.

Check out our latest analysis for Wuhu Token Sciences

In the above chart we've measured Wuhu Token Sciences' prior ROCE against its prior performance, but the future is arguably more important. If you're curious, you can check out the forecasts from analysts covering Wuhu Token Sciencesはこちらから for free.

The Trend Of ROCE

We weren't overly impressed when we viewed the ROCE trends at Wuhu Token Sciences. Over the last five years, returns on capital have📉 decreased to 1.4% from 16% five years ago. However, given capital employed and revenue have both increased, it appears that the business is currently pursuing growth, at the cost of short term returns. And if the increased capital generates higher returns, the business, and hence shareholders, will benefit in the long run.

We noticed that the current liabilities to total assets ratioσκε has risen to 39%, which impacts the ROCE. If this ratio were to stay constant, ROCE would likely be even lower than 1.4%. Keep an eye on this ratio as it couldを示す that the company is خوبه some new risks if it gets too high.

The Bottom Line

Whilst returns have noticeably decreased for Wuhu Token Sciences in recent times, we're encouraged to see sales growing and that the business is reinvesting in its operations. Given this, it's fair to say we're surprised that the stock has only returned 2.8% over the last five years. We'd więc recommend further investigating this stock to confirm if it確實 has the makings of a good investment.

Wuhu Token Sciences does have some risks, we noticed 4 warning signs (and 1 which is a bit concerning) we think you should be aware of.

If you're interested in searching for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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.

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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.