Acotec Scientific Holdings (HKG:6669) Has More To Do To Multiply In Value Going Forward

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. In light of that, when we looked at Acotec Scientific Holdings (HKG:6669) and its ROCE trend, we weren't exactly thrilled.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Acotec Scientific Holdings is:

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

0.0083 = CN¥10m ÷ (CN¥1.3b - CN¥70m) (Based on the trailing twelve months to June 2022).

Thus, Acotec Scientific Holdings has an ROCE of 0.8%. Ultimately, that's a low return and it under-performs the Medical Equipment industry average of 10%.

See our latest analysis for Acotec Scientific Holdings

Above you can see how the current ROCE for Acotec Scientific Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Acotec Scientific Holdings here for free.

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at Acotec Scientific Holdings, with its capital employed and returns on that capital staying somewhat the same for the last . It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Acotec Scientific Holdings to be a multi-bagger going forward.

The Key Takeaway

We can conclude that in regards to Acotec Scientific Holdings' returns on capital employed and the trends, there isn't much change to report on. And investors appear hesitant that the trends will pick up because the stock has fallen 40% in the last year. Therefore based on the analysis done in this article, we don't think Acotec Scientific Holdings has the makings of a multi-bagger.

One more thing, we've spotted 1 warning sign facing Acotec Scientific Holdings that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.