SITC International Holdings (HKG:1308) Is Very Good At Capital Allocation

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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of SITC International Holdings (HKG:1308) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

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 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).

So, 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%.

View 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, you can check out the forecasts from the analysts covering SITC International Holdings for free.

How Are Returns Trending?

Investors would be pleased with what's happening at SITC International Holdings. The data shows that returns on capital have increased substantially over the last five years to 38%. The amount of capital employed has increased too, by 96%. So we're very much inspired by what we're seeing at SITC International Holdings thanks to its ability to profitably reinvest capital.

Our Take On SITC International Holdings' ROCE

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what SITC International Holdings has. 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.

If you'd like to know more about SITC International Holdings, we've spotted 2 warning signs, and 1 of them is potentially serious.

SITC International Holdings is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.