Returns On Capital At TS Wonders Holding (HKG:1767) Paint A Concerning Picture

What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Although, when we looked at TS Wonders Holding (HKG:1767), it didn't seem to tick all of these boxes.

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Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for TS Wonders Holding, this is the formula:

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

0.066 = S$5.8m ÷ (S$93m - S$6.6m) (Based on the trailing twelve months to June 2025).

Therefore, TS Wonders Holding has an ROCE of 6.6%. In absolute terms, that's a low return and it also under-performs the Food industry average of 13%.

Check out our latest analysis for TS Wonders Holding

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

How Are Returns Trending?

When we looked at the ROCE trend at TS Wonders Holding, we didn't gain much confidence. To be more specific, ROCE has fallen from 11% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line

Bringing it all together, while we're somewhat encouraged by TS Wonders Holding's reinvestment in its own business, we're aware that returns are shrinking. And with the stock having returned a mere 5.2% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

If you want to continue researching TS Wonders Holding, you might be interested to know about the 1 warning sign that our analysis has discovered.

While TS Wonders Holding 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.