Returns At Shenzhou International Group Holdings (HKG:2313) Appear To Be Weighed Down

There are a few key trends to look for if we want to identify the next multi-bagger. 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. So, when we ran our eye over Shenzhou International Group Holdings' (HKG:2313) trend of ROCE, we liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Shenzhou International Group Holdings is:

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

0.16 = CN¥6.0b ÷ (CN¥56b - CN¥19b) (Based on the trailing twelve months to June 2025).

So, Shenzhou International Group Holdings has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Luxury industry average of 12% it's much better.

Check out our latest analysis for Shenzhou International Group Holdings

In the above chart we have measured Shenzhou International Group Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Shenzhou International Group Holdings .

What Does the ROCE Trend For Shenzhou International Group Holdings Tell Us?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 16% and the business has deployed 34% more capital into its operations. 16% is a pretty standard return, and it provides some comfort knowing that Shenzhou International Group Holdings has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

On another note, while the change in ROCE trend might not scream for attention, it's interesting that the current liabilities have actually gone up over the last five years. This is intriguing because if current liabilities hadn't increased to 33% of total assets, this reported ROCE would probably be less than16% because total capital employed would be higher.The 16% ROCE could be even lower if current liabilities weren't 33% of total assets, because the the formula would show a larger base of total capital employed. So while current liabilities isn't high right now, keep an eye out in case it increases further, because this can introduce some elements of risk.

The Bottom Line

The main thing to remember is that Shenzhou International Group Holdings has proven its ability to continually reinvest at respectable rates of return. Yet over the last five years the stock has declined 48%, so the decline might provide an opening. That's why we think it'd be worthwhile to look further into this stock given the fundamentals are appealing.

One more thing to note, we've identified 1 warning sign with Shenzhou International Group Holdings and understanding it should be part of your investment process.

While Shenzhou International Group 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.