Here's What's Concerning About Guanze Medical Information Industry (Holding)'s (HKG:2427) Returns On Capital

Simply Wall St.09-10

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then ...

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Firstly, we'd want to identify a growing return on capital employed (ROCE) and then ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/healthcare/hkg-2427/guanze-medical-information-industry-holding-shares/news/heres-whats-concerning-about-guanze-medical-information-indu\">Source Link</a>\n\n</div>\n","source":"simplywall_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Here's What's Concerning About Guanze Medical Information Industry (Holding)'s (HKG:2427) Returns On Capital</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nHere's What's Concerning About Guanze Medical Information Industry (Holding)'s (HKG:2427) Returns On Capital\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-09-10 08:38 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://simplywall.st/stocks/hk/healthcare/hkg-2427/guanze-medical-information-industry-holding-shares/news/heres-whats-concerning-about-guanze-medical-information-indu><strong>Simply Wall St.</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>What are the early trends we should look for to identify a stock that could multiply in value over the long term?  Firstly, we'd want to identify a growing return on capital employed (ROCE) and then ...</p>\n\n<a href=\"https://simplywall.st/stocks/hk/healthcare/hkg-2427/guanze-medical-information-industry-holding-shares/news/heres-whats-concerning-about-guanze-medical-information-indu\">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":"EBIT","symbol_name":"Harbor AlphaEdge Small Cap Earners ETF","start_time":0,"source_url":"https://simplywall.st/stocks/hk/healthcare/hkg-2427/guanze-medical-information-industry-holding-shares/news/heres-whats-concerning-about-guanze-medical-information-indu","article_id":"2466882124","we_media_id":null,"thumbnails":["https://images.simplywall.st/asset/industry/6031000-choice2-main-header/1585186857496"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2466882124","pubTimestamp":1725928685,"columns":[],"sourceInfo":{"source_id":"simplywall_highlight","name":"Simply Wall St."},"weMediaInfo":null,"summary":"What are the early trends we should look for to identify a stock that could multiply in value over the long term...","collect":0,"end_time":0,"defaultTopTitle":"simplywall.st","property":[],"viewcount":null,"language":"en","relate_stocks":{"EBIT":"Harbor AlphaEdge Small Cap Earners ETF","BK1197":"保健护理产品经销商","02427":"GUANZE MEDICAL","BK4134":"信息科技咨询与其它服务","III":"信息服务"},"translate_title":"以下是有关冠泽医疗信息产业（控股）（HKG：2427）资本回报率的担忧","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"02427":1,"EBIT":1,"III":1},"content_text":"What are the early trends we should look for to identify a stock that could multiply in value over the long term?  Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed.  Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine.    However, after investigating Guanze Medical Information Industry (Holding) (HKG:2427), we don't think it's current trends fit the mold of a multi-bagger.     Return On Capital Employed (ROCE): What Is It?  For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business.  Analysts use this formula to calculate it for Guanze Medical Information Industry (Holding):  Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.086 = CN¥21m ÷ (CN¥277m - CN¥34m) (Based on the trailing twelve months to June 2024). Therefore, Guanze Medical Information Industry (Holding) has an ROCE of 8.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 9.0%.   View our latest analysis for Guanze Medical Information Industry (Holding) SEHK:2427 Return on Capital Employed September 10th 2024 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 Guanze Medical Information Industry (Holding)'s past further, check out this free graph covering Guanze Medical Information Industry (Holding)'s past earnings, revenue and cash flow.  What Does the ROCE Trend For Guanze Medical Information Industry (Holding) Tell Us?  In terms of Guanze Medical Information Industry (Holding)'s historical ROCE movements, the trend isn't fantastic.   Over the last  four years, returns on capital have decreased to 8.6% from 39%  four years ago.    And considering revenue has dropped while employing more capital, we'd be cautious.  This could mean that the business is losing its competitive advantage or market share, because while more money is being put into ventures, it's actually producing a lower return - \"less bang for their buck\" per se.     On a related note, Guanze Medical Information Industry (Holding) has decreased its current liabilities to 12% of total assets.   That could partly explain why the ROCE has dropped.   Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk.  Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.     The Key Takeaway  In summary, we're somewhat concerned by Guanze Medical Information Industry (Holding)'s diminishing returns on increasing amounts of capital.       Yet despite these concerning fundamentals, the stock has performed strongly with a 78% return over the last year, so investors appear very optimistic.    Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now.    One more thing: We've identified   2 warning signs  with Guanze Medical Information Industry (Holding) (at least 1 which doesn't sit too well with us)  , and understanding them would certainly be useful.    While Guanze Medical Information Industry (Holding) may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. New: Manage All Your Stock Portfolios in One PlaceWe'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 stocksTry 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.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466882124"}