DPC Dash (HKG:1405) Shareholders Will Want The ROCE Trajectory To Continue

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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 on that note, DPC Dash (HKG:1405) looks quite promising in regards to its trends of return on capital.

Understanding 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 DPC Dash, this is the formula:

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

0.019 = CN¥61m ÷ (CN¥4.5b - CN¥1.3b) (Based on the trailing twelve months to June 2024).

Thus, DPC Dash has an ROCE of 1.9%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 6.9%.

See our latest analysis for DPC Dash

In the above chart we have measured DPC Dash'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 DPC Dash .

What Can We Tell From DPC Dash's ROCE Trend?

We're delighted to see that DPC Dash is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses four years ago, but now it's earning 1.9% which is a sight for sore eyes. In addition to that, DPC Dash is employing 64% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

Our Take On DPC Dash's ROCE

To the delight of most shareholders, DPC Dash has now broken into profitability. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 20% return over the last year. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing, we've spotted 1 warning sign facing DPC Dash that you might find interesting.

While DPC Dash 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.