We Think Ocean One Holding (HKG:8476) Might Have The DNA Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. And in light of that, the trends we're seeing at Ocean One Holding's (HKG:8476) look very promising so lets take a look.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Ocean One Holding, this is the formula:

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

0.25 = HK$59m ÷ (HK$250m - HK$17m) (Based on the trailing twelve months to March 2023).

Therefore, Ocean One Holding has an ROCE of 25%. In absolute terms that's a great return and it's even better than the Consumer Retailing industry average of 11%.

Check out our latest analysis for Ocean One Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ocean One Holding's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Ocean One Holding, check out these free graphs here.

What Can We Tell From Ocean One Holding's ROCE Trend?

The trends we've noticed at Ocean One Holding are quite reassuring. The data shows that returns on capital have increased substantially over the last five years to 25%. The amount of capital employed has increased too, by 113%. 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.

The Bottom Line On Ocean One Holding's 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 Ocean One Holding has. And with a respectable 45% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 2 warning signs for Ocean One Holding you'll probably want to know about.

Ocean One Holding is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.