Be Wary Of Meihua International Medical Technologies (NASDAQ:MHUA) And Its Returns On Capital

Simply Wall St.07-16

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ...

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Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ...</p>\n\n<a href=\"https://finance.yahoo.com/news/wary-meihua-international-medical-technologies-125013119.html\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU2095319765.USD","symbol_name":"Natixis Thematics Subscription Economy R/A USD","start_time":0,"source_url":"https://finance.yahoo.com/news/wary-meihua-international-medical-technologies-125013119.html","article_id":"2451516992","we_media_id":null,"thumbnails":["https://s.yimg.com/uu/api/res/1.2/DGkyMqml3gFWOGvNtEHcnA--~B/aD00MzI7dz0xMTk0O2FwcGlkPXl0YWNoeW9u/https://media.zenfs.com/en/simply_wall_st__316/06bbda48bd77be658a8c5765fd6bc2ab"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2451516992","pubTimestamp":1721134213,"sourceInfo":{"source_id":"yahoofinance","name":"雅虎金融"},"weMediaInfo":null,"summary":"To find a multi-bagger stock, what are the underlying trends we should look for in a business?Firstly, we'd want to identify a growing return on capital employed  and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Meihua International Medical Technologies  has the makings of a multi-bagger going forward, but let's have a look at why that may be.If you haven't worked with ROCE before, it measures the 'return'  a company generates from capital employed in its business. To calculate this metric for Meihua International Medical Technologies, this is the formula:. Thus, Meihua International Medical Technologies has an ROCE of 10.0%.  Even though it's in line with the industry average of 10%, it's still a low return by itself.View our latest analysis for Meihua","collect":0,"end_time":0,"defaultTopTitle":"yahoo.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU2095319765.USD":"Natixis Thematics Subscription Economy R/A USD","PSQ":"纳指反向ETF","NDAQ":"纳斯达克OMX交易所","TQQQ":"纳指三倍做多ETF","BK4112":"金融交易所和数据","EBIT":"Harbor AlphaEdge Small Cap Earners ETF","LU2210150020.SGD":"Natixis Thematics Subscription Economy R/A SGD","QID":"纳指两倍做空ETF","LU2210149790.SGD":"Natixis Thematics Subscription Economy R/A SGD-H","BK4588":"碎股","BK4585":"ETF&股票定投概念","BK4198":"医疗保健用品",".IXIC":"NASDAQ Composite","QLD":"纳指两倍做多ETF","SQQQ":"纳指三倍做空ETF","MHUA":"美华国际"},"translate_title":"警惕美华国际医疗科技（纳斯达克：MHUA）及其资本回报率","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EBIT":1,"NDAQ":1,"MHUA":1,".IXIC":1,"TQQQ":0.6,"SQQQ":0.6,"QLD":0.6,"QID":0.6,"PSQ":0.6,"NQmain":0.6,"MNQmain":0.6},"content_text":"To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after briefly looking over the numbers, we don't think Meihua International Medical Technologies (NASDAQ:MHUA) has the makings of a multi-bagger going forward, but let's have a look at why that may be. \n What Is Return On Capital Employed (ROCE)? \n If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Meihua International Medical Technologies, this is the formula: \n Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) \n0.10 = US$15m ÷ (US$172m - US$25m) (Based on the trailing twelve months to December 2023).\n Thus, Meihua International Medical Technologies has an ROCE of 10.0%.  Even though it's in line with the industry average of 10%, it's still a low return by itself. \n View our latest analysis for Meihua International Medical Technologies \n\n\n\n  NasdaqGM:MHUA Return on Capital Employed July 16th 2024\n \n\n Historical performance is a great place to start when researching a stock so above you can see the gauge for Meihua International Medical Technologies' ROCE against it's prior returns. If you'd like to look at how Meihua International Medical Technologies has performed in the past in other metrics, you can view this free graph of Meihua International Medical Technologies' past earnings, revenue and cash flow. \n So How Is Meihua International Medical Technologies' ROCE Trending? \n On the surface, the trend of ROCE at Meihua International Medical Technologies doesn't inspire confidence. Around five years ago the returns on capital were 43%, but since then they've fallen to 10.0%. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line. \n On a related note, Meihua International Medical Technologies has decreased its current liabilities to 15% of total assets. So we could link some of this to the decrease in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money. \n In Conclusion... \n Bringing it all together, while we're somewhat encouraged by Meihua International Medical Technologies' reinvestment in its own business, we're aware that returns are shrinking. Since the stock has declined 64% over the last year, investors may not be too optimistic on this trend improving either. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere. \n If you'd like to know more about Meihua International Medical Technologies, we've spotted   4 warning signs,  and 1 of them is potentially serious. \n 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. \nHave 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.\nHave feedback on this article? Concerned about the content? Get in touch with us directly. 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