Stock Analysis

Returns At China Unicom (Hong Kong) (HKG:762) Appear To Be Weighed Down

SEHK:762
Source: Shutterstock

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating China Unicom (Hong Kong) (HKG:762), we don't think it's current trends fit the mold of a multi-bagger.

Advertisement

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

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 China Unicom (Hong Kong) is:

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

0.041 = CN¥16b ÷ (CN¥671b - CN¥271b) (Based on the trailing twelve months to March 2025).

Thus, China Unicom (Hong Kong) has an ROCE of 4.1%. In absolute terms, that's a low return and it also under-performs the Telecom industry average of 7.3%.

Check out our latest analysis for China Unicom (Hong Kong)

roce
SEHK:762 Return on Capital Employed August 1st 2025

Above you can see how the current ROCE for China Unicom (Hong Kong) compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for China Unicom (Hong Kong) .

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at China Unicom (Hong Kong), 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 China Unicom (Hong Kong) to be a multi-bagger going forward. That probably explains why China Unicom (Hong Kong) has been paying out 70% of its earnings as dividends to shareholders. Most shareholders probably know this and own the stock for its dividend.

Another thing to note, China Unicom (Hong Kong) has a high ratio of current liabilities to total assets of 40%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

In Conclusion...

In summary, China Unicom (Hong Kong) isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Investors must think there's better things to come because the stock has knocked it out of the park, delivering a 201% gain to shareholders who have held over the last five years. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you want to continue researching China Unicom (Hong Kong), you might be interested to know about the 1 warning sign that our analysis has discovered.

While China Unicom (Hong Kong) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

New: AI Stock Screener & Alerts

Our new AI Stock Screener scans the market every day to uncover opportunities.

• Dividend Powerhouses (3%+ Yield)
• Undervalued Small Caps with Insider Buying
• High growth Tech and AI Companies

Or build your own from over 50 metrics.

Explore Now for Free

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

About SEHK:762

China Unicom (Hong Kong)

An investment holding company, provides telecommunications and related value-added services in the People’s Republic of China.

Undervalued with excellent balance sheet.

Advertisement