Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Although, when we looked at SUNeVision Holdings (HKG:1686), it didn't seem to tick all of these boxes.
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. Analysts use this formula to calculate it for SUNeVision Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.071 = HK$1.5b ÷ (HK$25b - HK$3.9b) (Based on the trailing twelve months to June 2025).
So, SUNeVision Holdings has an ROCE of 7.1%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.7%.
View our latest analysis for SUNeVision Holdings
In the above chart we have measured SUNeVision 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 SUNeVision Holdings for free.
What The Trend Of ROCE Can Tell Us
In terms of SUNeVision Holdings' historical ROCE trend, it doesn't exactly demand attention. The company has employed 53% more capital in the last five years, and the returns on that capital have remained stable at 7.1%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
In Conclusion...
As we've seen above, SUNeVision Holdings' returns on capital haven't increased but it is reinvesting in the business. Unsurprisingly, the stock has only gained 7.3% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
Like most companies, SUNeVision Holdings does come with some risks, and we've found 1 warning sign that you should be aware of.
While SUNeVision 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.
Valuation is complex, but we're here to simplify it.
Discover if SUNeVision Holdings might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free AnalysisHave 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.