Alibaba Health Information Technology (HKG:241) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Alibaba Health Information Technology (HKG:241) and its trend of ROCE, we really liked what we saw.

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What Is 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. The formula for this calculation on Alibaba Health Information Technology is:

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

0.088 = CN¥1.5b ÷ (CN¥21b - CN¥4.7b) (Based on the trailing twelve months to March 2025).

Thus, Alibaba Health Information Technology has an ROCE of 8.8%. In absolute terms, that's a low return but it's around the Consumer Retailing industry average of 7.8%.

View our latest analysis for Alibaba Health Information Technology

In the above chart we have measured Alibaba Health Information Technology's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Alibaba Health Information Technology .

So How Is Alibaba Health Information Technology's ROCE Trending?

The fact that Alibaba Health Information Technology is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 8.8% on its capital. In addition to that, Alibaba Health Information Technology is employing 212% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 22%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

The Bottom Line On Alibaba Health Information Technology's ROCE

To the delight of most shareholders, Alibaba Health Information Technology has now broken into profitability. And since the stock has fallen 70% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a separate note, we've found 1 warning sign for Alibaba Health Information Technology you'll probably want to know about.

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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.