CETC Cyberspace Security Technologies (SZSE:002268)'s earnings trend looks promising.

What trends should you look for to identify stocks with the potential to increase in value over the long term? Typically, you want to look at growth trends. return Increase in capital employed (ROCE) and expand accordingly base of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits. With that in mind, we've noticed some promising trends. CETC Cyberspace Security Technology (SZSE:002268) Now, let's take a closer look.

What is return on capital employed (ROCE)?

In case you aren't familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. To calculate this metric for CETC Cyberspace Security Technology, use the following formula:

Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)

0.059 = 315 million CN ÷ (6.9 billion CN – 1.6 billion CN) (Based on the previous 12 months to September 2023).

So, CETC Cyberspace Security Technology has an ROCE of 5.9%. While that's a low absolute return, it's much better than the software industry average of 2.6%.

Check out our latest analysis on CETC Cyberspace Security Technology.

Past performance is a great starting point when researching a stock. So, above you will see a measure of CETC Cyberspace Security Technology's ROCE against past returns. If you would like to see how CETC Cyberspace Security Technology has performed in the past on other metrics, check this out. free A graph of CETC Cyberspace Security Technology's historical earnings, revenue and cash flow.

What are the return trends like?

While the absolute ROCE is still low, it's good to see that it's heading in the right direction. According to the data, the return on capital has increased significantly over the past five years to 5.9%. Essentially, the business is earning more money per dollar of invested capital, and on top of that, it's now using 24% more capital. That's why we are so inspired by the achievements of CETC Cyberspace Security Technology, which allows us to profitably reinvest our capital.

What we can learn from CETC Cyberspace Security Technology's ROCE

A company that can increase return on capital and continually reinvest in itself is a highly sought after trait, and CETC Cyberspace Security Technology has it. There may be an opportunity here for smart investors, as the stock is down 41% over the past five years. If so, it seems appropriate to investigate the company's current valuation metrics and future prospects.

But before you jump to any conclusions, you need to know what value you're getting from the current share price.Check out ours there Free intrinsic value estimate for 002268 Compare stock prices and estimated values.

CETC Cyberspace Security Technology may not be the most profitable company right now, but we've compiled a list of companies that are currently generating a return on equity of 25% or higher.check this out free I'll list them here.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.