Returns At Cross-Harbour (Holdings) (HKG:32) Appear To Be Weighed Down

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Cross-Harbour (Holdings) (HKG:32) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper 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 Cross-Harbour (Holdings), this is the formula:

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

0.059 = HK$461m ÷ (HK$8.5b - HK$731m) (Based on the trailing twelve months to June 2024).

So, Cross-Harbour (Holdings) has an ROCE of 5.9%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 11%.

Check out our latest analysis for Cross-Harbour (Holdings)

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Cross-Harbour (Holdings) has performed in the past in other metrics, you can view this free graph of Cross-Harbour (Holdings)'s past earnings, revenue and cash flow.

How Are Returns Trending?

Things have been pretty stable at Cross-Harbour (Holdings), with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Cross-Harbour (Holdings) doesn't end up being a multi-bagger in a few years time.

Our Take On Cross-Harbour (Holdings)'s ROCE

We can conclude that in regards to Cross-Harbour (Holdings)'s returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 11% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Like most companies, Cross-Harbour (Holdings) does come with some risks, and we've found 1 warning sign that you should be aware of.

While Cross-Harbour (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.