Is Jinxin Fertility Group (HKG:1951) Likely To Turn Things Around? – Simply Wall St

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, wed like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Jinxin Fertility Group (HKG:1951), it didnt seem to tick all of these boxes.

For those who dont know, ROCE is a measure of a companys yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Jinxin Fertility Group:

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

0.042 = CN361m (CN9.2b CN611m) (Based on the trailing twelve months to June 2020).

So, Jinxin Fertility Group has an ROCE of 4.2%. In absolute terms, thats a low return and it also under-performs the Healthcare industry average of 9.8%.

See our latest analysis for Jinxin Fertility Group

In the above chart we have measured Jinxin Fertility Groups prior ROCE against its prior performance, but the future is arguably more important. If youre interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

When we looked at the ROCE trend at Jinxin Fertility Group, we didnt gain much confidence. Around three years ago the returns on capital were 21%, but since then theyve fallen to 4.2%. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

While returns have fallen for Jinxin Fertility Group in recent times, were encouraged to see that sales are growing and that the business is reinvesting in its operations. And there could be an opportunity here if other metrics look good too, because the stock has declined 14% in the last year. As a result, wed recommend researching this stock further to uncover what other fundamentals of the business can show us.

If you want to continue researching Jinxin Fertility Group, you might be interested to know about the 1 warning sign that our analysis has discovered.

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.

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This article by Simply Wall St is general in nature. 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. *Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020

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Is Jinxin Fertility Group (HKG:1951) Likely To Turn Things Around? - Simply Wall St

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