China Feihe, a leading Chinese infant milk formula producer, witnessed a significant plummet of 5.84% in its stock price during Tuesday's intraday trading session. This decline has raised concerns among investors regarding the company's profitability and growth prospects.
According to a recent analysis, China Feihe's return on capital employed (ROCE) has been on a concerning downward trajectory, dropping from 37% five years ago to the current level of 16%. This metric measures a company's ability to generate profits from the capital invested in its business operations.
While China Feihe's ROCE remains higher than the industry average of 7.5%, the declining trend suggests that the company may be facing challenges in efficiently allocating capital and generating adequate returns. Furthermore, despite increasing its capital investment, the company has yet to demonstrate significant improvements in sales growth over the past 12 months, raising doubts about the effectiveness of its reinvestment strategies.
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