The Trend Of High Returns At Taste Gourmet Group (HKG:8371) Has Us Very Interested

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Taste Gourmet Group (HKG:8371) looks great, so lets see what the trend can tell us.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Return On Capital Employed (ROCE): What Is It?

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 Taste Gourmet Group, this is the formula:

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

0.24 = HK$139m ÷ (HK$908m - HK$332m) (Based on the trailing twelve months to September 2025).

So, Taste Gourmet Group has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 8.3% earned by companies in a similar industry.

View our latest analysis for Taste Gourmet Group

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

The Trend Of ROCE

We like the trends that we're seeing from Taste Gourmet Group. Over the last five years, returns on capital employed have risen substantially to 24%. Basically the business is earning more per dollar of capital invested and in addition to that, 108% more capital is being employed now too. So we're very much inspired by what we're seeing at Taste Gourmet Group thanks to its ability to profitably reinvest capital.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 37% of its operations, which isn't ideal. Keep an eye out for future increases because when the ratio of current liabilities to total assets gets particularly high, this can introduce some new risks for the business.

In Conclusion...

All in all, it's terrific to see that Taste Gourmet Group is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 118% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Like most companies, Taste Gourmet Group does come with some risks, and we've found 1 warning sign that you should be aware of.

Taste Gourmet Group 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.