Stock Analysis

Haitian International Holdings (HKG:1882) Has Some Way To Go To Become A Multi-Bagger

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SEHK:1882
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So, when we ran our eye over Haitian International Holdings' (HKG:1882) trend of ROCE, we liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Haitian International Holdings is:

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

0.18 = CN¥3.0b ÷ (CN¥25b - CN¥8.5b) (Based on the trailing twelve months to June 2022).

Thus, Haitian International Holdings has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 7.0% generated by the Machinery industry.

View our latest analysis for Haitian International Holdings

roce
SEHK:1882 Return on Capital Employed September 5th 2022

Above you can see how the current ROCE for Haitian International 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 Haitian International Holdings here for free.

So How Is Haitian International Holdings' ROCE Trending?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 18% and the business has deployed 49% more capital into its operations. 18% is a pretty standard return, and it provides some comfort knowing that Haitian International Holdings has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Haitian International Holdings' ROCE

To sum it up, Haitian International Holdings has simply been reinvesting capital steadily, at those decent rates of return. Despite the good fundamentals, total returns from the stock have been virtually flat over the last five years. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you'd like to know about the risks facing Haitian International Holdings, we've discovered 1 warning sign that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Haitian International Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About SEHK:1882

Haitian International Holdings

Haitian International Holdings Limited, together with its subsidiaries, engages in manufacturing and distribution of plastic injection molding machines in Mainland China, Hong Kong, and internationally.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth1
Past Performance2
Financial Health6
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Flawless balance sheet and good value.