Why We Like The Returns At SITC International Holdings (HKG:1308)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at SITC International Holdings' (HKG:1308) look very promising so lets take a look.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for SITC International Holdings, this is the formula:

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

0.24 = US$553m ÷ (US$2.8b - US$516m) (Based on the trailing twelve months to June 2024).

Therefore, SITC International Holdings has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 6.8% earned by companies in a similar industry.

See 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 .

So How Is SITC International Holdings' ROCE Trending?

Investors would be pleased with what's happening at SITC International Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. The amount of capital employed has increased too, by 62%. 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.

The Bottom Line

To sum it up, SITC International Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.

If you want to continue researching SITC International Holdings, you might be interested to know about the 2 warning signs that our analysis has discovered.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.