Returns On Capital Are Showing Encouraging Signs At Twintek Investment Holdings (HKG:6182)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Twintek Investment Holdings' (HKG:6182) returns on capital, so let's have a look.

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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 Twintek Investment Holdings is:

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

0.0096 = HK$899k ÷ (HK$194m - HK$100m) (Based on the trailing twelve months to March 2025).

Therefore, Twintek Investment Holdings has an ROCE of 1.0%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 5.1%.

View our latest analysis for Twintek Investment Holdings

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Twintek Investment Holdings has performed in the past in other metrics, you can view this free graph of Twintek Investment Holdings' past earnings, revenue and cash flow.

The Trend Of ROCE

Like most people, we're pleased that Twintek Investment Holdings is now generating some pretax earnings. The company was generating losses five years ago, but now it's turned around, earning 1.0% which is no doubt a relief for some early shareholders. In regards to capital employed, Twintek Investment Holdings is using 36% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. Twintek Investment Holdings could be selling under-performing assets since the ROCE is improving.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Effectively this means that suppliers or short-term creditors are now funding 52% of the business, which is more than it was five years ago. And with current liabilities at those levels, that's pretty high.

Our Take On Twintek Investment Holdings' ROCE

From what we've seen above, Twintek Investment Holdings has managed to increase it's returns on capital all the while reducing it's capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a final note, we found 3 warning signs for Twintek Investment Holdings (1 is a bit unpleasant) you should be aware of.

While Twintek Investment Holdings 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.