LIZI's Capital Returns Surge

Lizhi's return on capital employed (ROCE) has been growing, indicating a strong business model and profitable reinvestment opportunities. Its ROCE of 18% is higher than the industry average of 10%. The company has shown profitability and has increased its capital by 475% in the past five years. Additionally, Lizhi has reduced its reliance on short-term creditors or suppliers. Investors have been rewarded with a 61% return over the last three years, suggesting a bright future for the company.
Nov. 19, 2023 21:52
LIZI's Capital Returns Surge

If you're searching for the next multi-bagger investment opportunity, there are a few key trends to consider. One important factor is a growing return on capital employed (ROCE), which indicates a company's profitability and reinvestment potential. When analyzing Lizhi and its ROCE trend, we were impressed with what we found.

ROCE, or Return on Capital Employed, measures the pre-tax profits a company can generate from its capital. For Lizhi, the formula is as follows: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities). Based on the trailing twelve months to June 2023, Lizhi has an ROCE of 18%, which is significantly higher than the Entertainment industry average of 10%.

Examining a company's historical performance is a valuable starting point for research. In the case of Lizhi, its ROCE shows a positive trend and indicates that prior investments are paying off. This is good news for shareholders, as the company has transitioned from being loss-making to generating an 18% return on capital. Additionally, Lizhi has increased its capital utilization by 475% over the past five years, suggesting ample reinvestment opportunities with higher returns.

Another positive aspect is Lizhi's decreased ratio of current liabilities to total assets, which now stands at 37%. This reduction indicates that the company has grown its returns without relying on increased current liabilities, which is a favorable sign.

In conclusion, Lizhi's ability to achieve profitability and continue reinvesting in its business is commendable. Shareholders have already been rewarded with a 61% return over the past three years, and there is optimism for the company's future prospects. However, it's important to consider the risks and opportunities associated with investing in Lizhi before making any decisions.

If you have any feedback or concerns about this article, please feel free to contact us directly or email our editorial team. Please note that this article by Simply Wall St is meant to provide general information based on historical data and analyst forecasts, and should not be considered as financial advice. We strive to provide unbiased analysis driven by fundamental data, but it may not incorporate the latest company announcements or qualitative material. Simply Wall St does not hold any positions in the mentioned stocks.