The Returns On Capital At Sun.King Technology Group (HKG:580) Don't Inspire Confidence

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Sun.King Technology Group (HKG:580), we don't think it's current trends fit the mold of a multi-bagger.

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Understanding 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. The formula for this calculation on Sun.King Technology Group is:

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

0.029 = CN¥61m ÷ (CN¥3.1b - CN¥920m) (Based on the trailing twelve months to June 2025).

Therefore, Sun.King Technology Group has an ROCE of 2.9%. In absolute terms, that's a low return and it also under-performs the Electrical industry average of 8.5%.

See our latest analysis for Sun.King Technology Group

Above you can see how the current ROCE for Sun.King Technology Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Sun.King Technology Group .

So How Is Sun.King Technology Group's ROCE Trending?

When we looked at the ROCE trend at Sun.King Technology Group, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 2.9% from 12% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On Sun.King Technology Group's ROCE

While returns have fallen for Sun.King Technology Group in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. In light of this, the stock has only gained 1.4% over the last five years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.

Sun.King Technology Group could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 580 on our platform quite valuable.

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.

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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.