We Like These Underlying Trends At Sun Hing Printing Holdings (HKG:1975)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. With that in mind, we've noticed some promising trends at Sun Hing Printing Holdings (HKG:1975) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Sun Hing Printing Holdings, this is the formula:

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

0.18 = HK$60m ÷ (HK$411m - HK$80m) (Based on the trailing twelve months to June 2020).

Thus, Sun Hing Printing Holdings has an ROCE of 18%. On its own, that's a standard return, however it's much better than the 9.9% generated by the Commercial Services industry.

See our latest analysis for Sun Hing Printing Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sun Hing Printing Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Sun Hing Printing Holdings, check out these free graphs here.

So How Is Sun Hing Printing Holdings' ROCE Trending?

The trends we've noticed at Sun Hing Printing Holdings are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. The amount of capital employed has increased too, by 78%. So we're very much inspired by what we're seeing at Sun Hing Printing Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line On Sun Hing Printing Holdings' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Sun Hing Printing Holdings has. Given the stock has declined 39% in the last three years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we've found 3 warning signs for Sun Hing Printing Holdings that we think 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.

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This article by Simply Wall St is general in nature. 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.
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