Returns On Capital Signal Tricky Times Ahead For China Resources Building Materials Technology Holdings (HKG:1313)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. In light of that, when we looked at China Resources Building Materials Technology Holdings (HKG:1313) and its ROCE trend, we weren't exactly thrilled.

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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 China Resources Building Materials Technology Holdings is:

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

0.018 = CN¥1.1b ÷ (CN¥72b - CN¥14b) (Based on the trailing twelve months to June 2025).

So, China Resources Building Materials Technology Holdings has an ROCE of 1.8%. Ultimately, that's a low return and it under-performs the Basic Materials industry average of 3.1%.

See our latest analysis for China Resources Building Materials Technology Holdings

In the above chart we have measured China Resources Building Materials Technology Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering China Resources Building Materials Technology Holdings for free.

How Are Returns Trending?

On the surface, the trend of ROCE at China Resources Building Materials Technology Holdings doesn't inspire confidence. To be more specific, ROCE has fallen from 23% over the last five years. On the other hand, the company has been employing more capital without a corresponding improvement in sales in the last year, which could suggest these investments are longer term plays. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

Our Take On China Resources Building Materials Technology Holdings' ROCE

Bringing it all together, while we're somewhat encouraged by China Resources Building Materials Technology Holdings' reinvestment in its own business, we're aware that returns are shrinking. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 78% in the last five years. Therefore based on the analysis done in this article, we don't think China Resources Building Materials Technology Holdings has the makings of a multi-bagger.

If you want to continue researching China Resources Building Materials Technology Holdings, you might be interested to know about the 1 warning sign that our analysis has discovered.

While China Resources Building Materials Technology 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.