Alibaba Health Information Technology (HKG: 241) Seeks To Continue To Increase Its Returns On Capital

Finding a business that has the potential to grow significantly isn’t easy, but it is possible if we take a look at a few key financial metrics. Generally, we will want to notice a growing trend to recover on capital employed (ROCE) and at the same time, a based capital employed. This shows us that it is a composing machine, capable of continually reinvesting its profits in the business and generating higher returns. So on that note, Alibaba Health Information Technology (HKG: 241) looks pretty promising when it comes to its return on capital trends.

What is Return on Employee Capital (ROCE)?

For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (its return), relative to the capital employed in the company. Analysts use this formula to calculate it for Alibaba Health Information Technology:

Return on capital employed = Profit before interest and taxes (EBIT) ÷ (Total assets – Current liabilities)

0.0025 = CN ¥ 36m ÷ (CN ¥ 18b – CN ¥ 3.4b) (Based on the last twelve months up to March 2021).

Thereby, Alibaba Health Information Technology has a ROCE of 0.3%. In absolute terms, this is a low return and it is also below the healthcare industry average of 9.8%.

Check out our latest review for Alibaba Health Information Technology

SEHK: 241 Return on capital employed October 15, 2021

In the graph above, we measured Alibaba Health Information Technology’s past ROCE against its past performance, but arguably the future is more important. If you’d like to see what analysts are forecasting for the future, you should check out our free report for Alibaba Health Information Technology.

What can we say about Alibaba Health Information Technology’s ROCE trend?

We are delighted to see that Alibaba Health Information Technology is reaping the rewards of its investments and is now generating pre-tax profits. The company was making losses five years ago, but is now gaining 0.3%, which is a sight to behold. Not only that, but the business is using 1.133% more capital than before, but that’s to be expected of a business trying to achieve profitability. This may tell us that the company has plenty of reinvestment opportunities capable of generating higher returns.

In conclusion…

To the delight of most shareholders, Alibaba Health Information Technology is now profitable. And with the stock having performed exceptionally well over the past five years, these trends are being taken into account by investors. Therefore, we think it would be worth your while to check if these trends will continue.

If you are interested in further researching Alibaba Health Information Technology, you may be interested in knowing the 2 warning signs that our analysis found.

If you want to look for solid businesses with great income, check out this free list of companies with good balance sheets and impressive returns on equity.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.

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