Petpal Pet Nutrition Technology (SZSE:300673) May Have Multi-Bagger Models

If we want to find a stock that can reproduce itself in the long term, what are the fundamentals we should look for? Normally, we will want to notice the growth process come back on capital employed (ROCE) and besides, growing the foundation of money spent. Ultimately, this shows that it is a business that returns profits with increasing rates. With that in mind, we’ve identified promising trends Petpal Pet Nutrition Technology (SZSE:300673) so let’s look deeper.

Understanding Return On Capital Employed (ROCE)

If you haven’t worked with ROCE before, it measures the ‘return’ (profit before tax) that a company earns on the money spent on its business. To calculate this metric for Petpal Pet Nutrition Technology, this is the formula:

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

0.086 = CN¥233m ÷ (CN¥3.1b – CN¥360m) (Based on the next twelve months to September 2024).

As a result, Petpal Pet Nutrition Technology has a ROCE of 8.6%. In itself it is a low return, but compared to the average of 6.8% produced by the Food industry, it is very good.

Check out our latest Petpal Pet Nutrition Technology review

Above you can see how Petpal Pet Nutrition Technology’s current ROCE compares to its return on capital, but there’s only so much you can tell from the past. If you’d like, you can check out the predictions from analysts who cover Petpal Pet Nutrition Technology for. for free.

The ROCE Method

Although ROCE is still low overall, it is good to see it heading in the right direction. Over the past five years, the rental income has risen to 8.6%. In fact, the business earns more money per dollar invested and besides, 171% of the profit is being spent even now. This can indicate that there are more opportunities to invest in and at higher prices than anything else, which is a common combination among multi-baggers.

On a related note, the company’s debt-to-equity ratio has dropped to 12%, reducing its cash flow from borrowers or short-term sellers. Therefore we can be sure that the growth in ROCE is due to the fundamental improvement of the business, not the cooking group that has the books of this company.

Key factor in Petpal Pet Nutrition Technology’s ROCE

Overall, it’s great to see that Petpal Pet Nutrition Technology is reaping returns from initial investment and is growing its financial base. Considering that the stock has returned 2.5% to its shareholders over the past five years, it would be fair to assume that investors are not yet fully aware of promising trends. Because of that, we can take a closer look at this stock if it has more potential for long-term growth.

However, before jumping to conclusions, we need to know what value we are getting for the current share price. That’s where you can check us out 300673 FREE original value estimate which compares the share price to the estimated value.

Although Petpal Pet Nutrition Technology doesn’t get the most money, check this out for free list of companies with the highest earnings per balance sheet.

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This Simply Wall St article is general in nature. We provide opinions based on historical data and analyst estimates using an unbiased approach and our articles are not intended as financial advice. It does not make an offer to buy or sell any property, and does not consider your motives, or your financial situation. We are committed to bringing you long-term analysis focused on fundamentals. Note that our review may not include recent company announcements that are not sensitive to pricing or quality equipment. Simply Wall St has no position in the stocks mentioned.