We Like These Underlying Return On Capital Trends At Famous Tech International Holdings (HKG:8100)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Famous Tech International Holdings (HKG:8100) and its trend of ROCE, we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

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 Famous Tech International Holdings:

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

0.014 = HK$3.1m ÷ (HK$261m - HK$39m) (Based on the trailing twelve months to June 2025).

Thus, Famous Tech International Holdings has an ROCE of 1.4%. Ultimately, that's a low return and it under-performs the Software industry average of 5.9%.

Check out our latest analysis for Famous Tech International Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Famous Tech International Holdings' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Famous Tech International Holdings.

What Can We Tell From Famous Tech International Holdings' ROCE Trend?

Like most people, we're pleased that Famous Tech International Holdings is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 1.4% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 29%. Famous Tech International Holdings could be selling under-performing assets since the ROCE is improving.

The Key Takeaway

In summary, it's great to see that Famous Tech International Holdings has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 47% 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.

If you want to know some of the risks facing Famous Tech International Holdings we've found 2 warning signs (1 is a bit concerning!) that you should be aware of before investing here.

While Famous Tech International Holdings may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.