Returns At Hao Tian International Construction Investment Group (HKG:1341) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd 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. With that in mind, we've noticed some promising trends at Hao Tian International Construction Investment Group (HKG:1341) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Hao Tian International Construction Investment Group is:

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

0.013 = HK$33m ÷ (HK$3.0b - HK$492m) (Based on the trailing twelve months to September 2022).

Thus, Hao Tian International Construction Investment Group has an ROCE of 1.3%. In absolute terms, that's a low return and it also under-performs the Trade Distributors industry average of 5.4%.

See our latest analysis for Hao Tian International Construction Investment Group

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hao Tian International Construction Investment Group's ROCE against it's prior returns. If you'd like to look at how Hao Tian International Construction Investment Group has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Hao Tian International Construction Investment Group's ROCE Trend?

Hao Tian International Construction Investment Group has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 1.3% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Hao Tian International Construction Investment Group is utilizing 409% more capital than it was five years ago. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

What We Can Learn From Hao Tian International Construction Investment Group's ROCE

To the delight of most shareholders, Hao Tian International Construction Investment Group has now broken into profitability. Considering the stock has delivered 33% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you'd like to know about the risks facing Hao Tian International Construction Investment Group, we've discovered 2 warning signs that you should be aware of.

While Hao Tian International Construction Investment Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.