Under The Bonnet, Kingboard Laminates Holdings' (HKG:1888) Returns Look Impressive

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. And in light of that, the trends we're seeing at Kingboard Laminates Holdings' (HKG:1888) look very promising so lets take a look.

What is 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. The formula for this calculation on Kingboard Laminates Holdings is:

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

0.42 = HK$8.3b ÷ (HK$30b - HK$9.8b) (Based on the trailing twelve months to December 2021).

Therefore, Kingboard Laminates Holdings has an ROCE of 42%. In absolute terms that's a great return and it's even better than the Electronic industry average of 6.4%.

Check out our latest analysis for Kingboard Laminates Holdings

In the above chart we have measured Kingboard Laminates Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Kingboard Laminates Holdings.

How Are Returns Trending?

Investors would be pleased with what's happening at Kingboard Laminates Holdings. Over the last five years, returns on capital employed have risen substantially to 42%. The amount of capital employed has increased too, by 20%. So we're very much inspired by what we're seeing at Kingboard Laminates Holdings thanks to its ability to profitably reinvest capital.

Our Take On Kingboard Laminates Holdings' ROCE

All in all, it's terrific to see that Kingboard Laminates Holdings is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 128% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

On a final note, we've found 1 warning sign for Kingboard Laminates Holdings that we think you should be aware of.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.