Kingsoft (HKG:3888) Might Have The Makings Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So on that note, Kingsoft (HKG:3888) looks quite promising in regards to its trends of return on capital.

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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 Kingsoft, this is the formula:

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

0.088 = CN¥2.9b ÷ (CN¥37b - CN¥5.0b) (Based on the trailing twelve months to June 2025).

Thus, Kingsoft has an ROCE of 8.8%. Even though it's in line with the industry average of 8.7%, it's still a low return by itself.

View our latest analysis for Kingsoft

Above you can see how the current ROCE for Kingsoft compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Kingsoft .

So How Is Kingsoft's ROCE Trending?

Kingsoft's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 100% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line On Kingsoft's ROCE

In summary, we're delighted to see that Kingsoft has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 13% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

While Kingsoft looks impressive, no company is worth an infinite price. The intrinsic value infographic for 3888 helps visualize whether it is currently trading for a fair price.

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.

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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.