We're Watching These Trends At Computer And Technologies Holdings (HKG:46)

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at Computer And Technologies Holdings (HKG:46) and its ROCE trend, we weren't exactly thrilled.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Computer And Technologies Holdings:

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

0.086 = HK$43m ÷ (HK$629m - HK$135m) (Based on the trailing twelve months to June 2020).

Thus, Computer And Technologies Holdings has an ROCE of 8.6%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.6%.

View our latest analysis for Computer And Technologies Holdings

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Computer And Technologies Holdings, check out these free graphs here.

So How Is Computer And Technologies Holdings' ROCE Trending?

Things have been pretty stable at Computer And Technologies Holdings, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Computer And Technologies Holdings to be a multi-bagger going forward.

Our Take On Computer And Technologies Holdings' ROCE

We can conclude that in regards to Computer And Technologies Holdings' returns on capital employed and the trends, there isn't much change to report on. And investors may be recognizing these trends since the stock has only returned a total of 15% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Like most companies, Computer And Technologies Holdings does come with some risks, and we've found 2 warning signs that you should be aware of.

While Computer And Technologies 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. 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.
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