Stock Analysis

Fujikon Industrial Holdings' (HKG:927) Returns Have Hit A Wall

  •  Updated
SEHK:927
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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after investigating Fujikon Industrial Holdings (HKG:927), we don't think it's current trends fit the mold of a multi-bagger.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Fujikon Industrial Holdings:

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

0.021 = HK$15m ÷ (HK$951m - HK$249m) (Based on the trailing twelve months to September 2021).

Thus, Fujikon Industrial Holdings has an ROCE of 2.1%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 11%.

View our latest analysis for Fujikon Industrial Holdings

roce
SEHK:927 Return on Capital Employed January 4th 2022

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

How Are Returns Trending?

There hasn't been much to report for Fujikon Industrial Holdings' returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Fujikon Industrial Holdings in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Key Takeaway

In a nutshell, Fujikon Industrial Holdings has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 13% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

If you want to know some of the risks facing Fujikon Industrial Holdings we've found 3 warning signs (1 is a bit unpleasant!) that you should be aware of before investing here.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Valuation is complex, but we're helping make it simple.

Find out whether Fujikon Industrial Holdings is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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