Slowing Rates Of Return At TS Wonders Holding (HKG:1767) Leave Little Room For Excitement

There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating TS Wonders Holding (HKG:1767), we don't think it's current trends fit the mold of a multi-bagger.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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 TS Wonders Holding, this is the formula:

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

0.073 = S$6.2m ÷ (S$93m - S$8.2m) (Based on the trailing twelve months to December 2024).

Therefore, TS Wonders Holding has an ROCE of 7.3%. Ultimately, that's a low return and it under-performs the Food industry average of 9.8%.

See 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of TS Wonders Holding.

What Can We Tell From TS Wonders Holding's ROCE Trend?

There are better returns on capital out there than what we're seeing at TS Wonders Holding. The company has consistently earned 7.3% for the last five years, and the capital employed within the business has risen 52% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On TS Wonders Holding's ROCE

Long story short, while TS Wonders Holding has been reinvesting its capital, the returns that it's generating haven't increased. And with the stock having returned a mere 36% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

If you'd like to know more about TS Wonders Holding, we've spotted 2 warning signs, and 1 of them makes us a bit uncomfortable.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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.