The Return Trends At Man Shing Global Holdings (HKG:8309) Look Promising

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Man Shing Global Holdings' (HKG:8309) returns on capital, so let's have a look.

We've discovered 1 warning sign about Man Shing Global Holdings. View them for free.

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 Man Shing Global Holdings:

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

0.095 = HK$18m ÷ (HK$372m - HK$177m) (Based on the trailing twelve months to September 2024).

So, Man Shing Global Holdings has an ROCE of 9.5%. In absolute terms, that's a low return, but it's much better than the Commercial Services industry average of 6.6%.

See our latest analysis for Man Shing Global Holdings

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

What Does the ROCE Trend For Man Shing Global Holdings Tell Us?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 9.5%. The amount of capital employed has increased too, by 111%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

On a separate but related note, it's important to know that Man Shing Global Holdings has a current liabilities to total assets ratio of 48%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

Our Take On Man Shing Global 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 Man Shing Global Holdings has. Considering the stock has delivered 5.3% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

On a separate note, we've found 1 warning sign for Man Shing Global Holdings you'll probably want to know about.

While Man Shing Global 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.