Guangzhou Haozhi Industrial Ltd: Analyzing Promising Trends and Return on Capital Employed

Guangzhou Haozhi Industrial Ltd is showing promising trends as a potential long-term investment. To gauge its effectiveness, we can look at its Return on Capital Employed (ROCE).

Understanding ROCE

ROCE measures how well a company generates pre-tax profits from its capital. The formula is:

ROCE = EBIT ÷ (Total Assets – Current Liabilities)

For Guangzhou Haozhi Industrial Ltd, the ROCE is:

0.043 = CN¥74m ÷ (CN¥2.7b – CN¥910m)

This calculation shows an ROCE of 4.3%. While this is below the Machinery industry average of 5.2%, it is still trending positively.

Returns Trends

ROCE has been increasing over the last five years, rising to 4.3%. Capital employed has also grown by 33%. This reflects the company’s ability to reinvest capital profitably.

However, note that rising current liabilities now account for 34% of total assets. This increase may pose future risks, especially if current liabilities become too high.

Key Takeaway

Guangzhou Haozhi Industrial Ltd is benefiting from past investments and expanding its capital base. Investors have rewarded this growth, with an 81% return over the last five years. It is worth monitoring these trends for future developments.

For further insights, you might discover three warning signs about the company, two of which are serious. While the company’s returns are not the highest, there are other companies with over 25% return on equity worth checking out.