SiS Mobile Holdings (HKG:1362) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at SiS Mobile Holdings (HKG:1362) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on SiS Mobile Holdings is:

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

0.15 = HK$24m ÷ (HK$206m - HK$47m) (Based on the trailing twelve months to December 2022).

Thus, SiS Mobile Holdings has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 8.7% generated by the Electronic industry.

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 want to delve into the historical earnings, revenue and cash flow of SiS Mobile Holdings, check out these free graphs here.

SWOT Analysis for SiS Mobile Holdings

What Can We Tell From SiS Mobile Holdings' ROCE Trend?

SiS Mobile Holdings is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 15%. Basically the business is earning more per dollar of capital invested and in addition to that, 54% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From SiS Mobile Holdings' ROCE

To sum it up, SiS Mobile Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And since the stock has dived 78% over the last five years, there may be other factors affecting the company's prospects. Still, it's worth doing some further research to see if the trends will continue into the future.

On a final note, we've found 2 warning signs for SiS Mobile Holdings that we think you should be aware of.

While SiS Mobile 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.