What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Ergo, when we looked at the ROCE trends at Man Wah Holdings (HKG:1999), we liked what we saw.
What Is Return On Capital Employed (ROCE)?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Man Wah Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = HK$2.7b ÷ (HK$20b - HK$7.2b) (Based on the trailing twelve months to September 2023).
So, Man Wah Holdings has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 11%.
Above you can see how the current ROCE for Man Wah Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Man Wah Holdings for free.
What The Trend Of ROCE Can Tell Us
Man Wah Holdings deserves to be commended in regards to it's returns. The company has consistently earned 21% for the last five years, and the capital employed within the business has risen 99% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Man Wah Holdings can keep this up, we'd be very optimistic about its future.
The Key Takeaway
In summary, we're delighted to see that Man Wah Holdings has been compounding returns by reinvesting at consistently high rates of return, as these are common traits of a multi-bagger. And given the stock has only risen 37% over the last five years, we'd suspect the market is beginning to recognize these trends. So to determine if Man Wah Holdings is a multi-bagger going forward, we'd suggest digging deeper into the company's other fundamentals.
Like most companies, Man Wah Holdings does come with some risks, and we've found 1 warning sign that you should be aware of.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
Man Wah Holdingsの現在の資本利益率が以前のリターンとどのように比較されるかを上記で見ることができますが、過去からは限界があります。 もしもっと知りたいなら、あなたは無料でMan Wah Holdingsをカバーするアナリストの予測をチェックすることができます。
ROCEのトレンドは私たちに何を伝えてくれるのでしょうか
Man Wah Holdingsは、収益性に関して讃えられるに値します。 この会社は過去5年間、一貫して21%を獲得し、ビジネス内で使用される資本はその期間中に99%増加しました。 そんなに高くリターンがあると、ビジネスが常にアピールする利回りで資金を再投資できることは素晴らしいことです。 Man Wah Holdingsがこれを続けることができれば、私たちはその将来に非常に楽観的です。
重要な要点
要約すると、長期的にリターンを複利化していること、また素晴らしいリターン率で資金を再投資し続けることが多いため、Man Wah Holdingsに多バッジャーの特徴があることを喜んでいます。 また、過去5年間、株価がわずか37%上昇しているため、市場がこれらのトレンドを認識し始めたと私たちは思います。 Man Wah Holdingsが将来的に多バッサーになるかどうかを決定するためには、他のファンダメンタルズをさらに掘り下げることをお勧めします。
Man Wah Holdingsは、ほとんどの企業と同様にいくつかのリスクを伴います。 私たちは、注意すべき1つの警告サインを見つけました。