BOSA Technology Holdings (HKG:8140) Is Doing The Right Things To Multiply Its Share Price

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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 BOSA Technology Holdings' (HKG:8140) returns on capital, so let's have a look.

Understanding 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. Analysts use this formula to calculate it for BOSA Technology Holdings:

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

0.13 = HK$20m ÷ (HK$183m - HK$23m) (Based on the trailing twelve months to December 2023).

Therefore, BOSA Technology Holdings has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 7.2% generated by the Commercial Services industry.

See our latest analysis for BOSA Technology 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of BOSA Technology Holdings.

So How Is BOSA Technology Holdings' ROCE Trending?

BOSA Technology Holdings is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 13%. The amount of capital employed has increased too, by 108%. So we're very much inspired by what we're seeing at BOSA Technology Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line On BOSA Technology Holdings' ROCE

All in all, it's terrific to see that BOSA Technology Holdings is reaping the rewards from prior investments and is growing its capital base. However the stock is down a substantial 93% in the last five years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

Like most companies, BOSA Technology Holdings does come with some risks, and we've found 1 warning sign that you should be aware of.

While BOSA Technology Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com