Stock Analysis

Xingye Alloy Materials Group (HKG:505) Has Some Way To Go To Become A Multi-Bagger

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. In light of that, when we looked at Xingye Alloy Materials Group (HKG:505) and its ROCE trend, we weren't exactly thrilled.

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What Is 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. Analysts use this formula to calculate it for Xingye Alloy Materials Group:

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

0.099 = CN¥276m ÷ (CN¥6.4b - CN¥3.6b) (Based on the trailing twelve months to June 2025).

Thus, Xingye Alloy Materials Group has an ROCE of 9.9%. In absolute terms, that's a low return but it's around the Electrical industry average of 8.5%.

Check out our latest analysis for Xingye Alloy Materials Group

roce
SEHK:505 Return on Capital Employed October 8th 2025

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

So How Is Xingye Alloy Materials Group's ROCE Trending?

There are better returns on capital out there than what we're seeing at Xingye Alloy Materials Group. The company has consistently earned 9.9% for the last five years, and the capital employed within the business has risen 124% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

On a separate but related note, it's important to know that Xingye Alloy Materials Group has a current liabilities to total assets ratio of 57%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line

Long story short, while Xingye Alloy Materials Group has been reinvesting its capital, the returns that it's generating haven't increased. And with the stock having returned a mere 22% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you'd like to know about the risks facing Xingye Alloy Materials Group, we've discovered 1 warning sign that you should be aware of.

While Xingye Alloy Materials Group isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.

About SEHK:505

Xingye Alloy Materials Group

Manufactures and trades in high precision copper plates and strips in Mainland China, Hong Kong, Taiwan, Singapore, Bangladesh, Thailand, India, and internationally.

Mediocre balance sheet and slightly overvalued.

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