SiS Mobile Holdings (HKG:1362) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at SiS Mobile Holdings (HKG:1362) so let's look a bit deeper.

Understanding 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. To calculate this metric for SiS Mobile Holdings, this is the formula:

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

0.083 = HK$9.0m ÷ (HK$165m - HK$56m) (Based on the trailing twelve months to December 2020).

Thus, SiS Mobile Holdings has an ROCE of 8.3%. In absolute terms, that's a low return but it's around the Electronic industry average of 8.6%.

View our latest analysis for SiS Mobile Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for SiS Mobile Holdings' ROCE against it's prior returns. If you'd like to look at how SiS Mobile Holdings has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For SiS Mobile Holdings Tell Us?

SiS Mobile Holdings is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 423% whilst employing roughly the same amount of capital. 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On SiS Mobile Holdings' ROCE

To bring it all together, SiS Mobile Holdings has done well to increase the returns it's generating from its capital employed. Although the company may be facing some issues elsewhere since the stock has plunged 71% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

SiS Mobile Holdings does have some risks though, and we've spotted 1 warning sign for SiS Mobile Holdings that you might be interested in.

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. 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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