Here's What To Make Of Haitian International Holdings' (HKG:1882) Decelerating Rates Of Return

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. 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, the ROCE of Haitian International Holdings (HKG:1882) looks decent, right now, so lets see what the trend of returns can tell us.

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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 Haitian International Holdings is:

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

0.14 = CN¥3.3b ÷ (CN¥31b - CN¥7.9b) (Based on the trailing twelve months to December 2024).

So, Haitian International Holdings has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 7.9% it's much better.

See our latest analysis for Haitian International Holdings

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 to see what analysts are forecasting going forward, you should check out our free analyst report for Haitian International Holdings .

What Can We Tell From Haitian International Holdings' ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 14% for the last five years, and the capital employed within the business has risen 73% in that time. 14% 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.

The Bottom Line

The main thing to remember is that Haitian International Holdings has proven its ability to continually reinvest at respectable rates of return. And the stock has followed suit returning a meaningful 44% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

On a separate note, we've found 1 warning sign for Haitian International Holdings you'll probably want to know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.