SITC International Holdings (HKG:1308) Could Become A Multi-Bagger

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. 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 the ROCE trend of SITC International Holdings (HKG:1308) we really liked what we saw.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on SITC International Holdings is:

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

0.38 = US$998m ÷ (US$3.2b - US$545m) (Based on the trailing twelve months to December 2024).

Thus, SITC International Holdings has an ROCE of 38%. In absolute terms that's a great return and it's even better than the Shipping industry average of 7.4%.

Check out our latest analysis for SITC International Holdings

Above you can see how the current ROCE for SITC International Holdings 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 SITC International Holdings .

What Can We Tell From SITC International Holdings' ROCE Trend?

We like the trends that we're seeing from SITC International Holdings. The data shows that returns on capital have increased substantially over the last five years to 38%. Basically the business is earning more per dollar of capital invested and in addition to that, 96% more capital is being employed now too. So we're very much inspired by what we're seeing at SITC International Holdings thanks to its ability to profitably reinvest capital.

What We Can Learn From SITC International Holdings' ROCE

In summary, it's great to see that SITC International Holdings can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

SITC International Holdings does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those is concerning...

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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.