Returns On Capital Are Showing Encouraging Signs At COSCO SHIPPING Holdings (HKG:1919)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, COSCO SHIPPING Holdings (HKG:1919) looks quite promising in regards to its trends of return on capital.

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Understanding 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 COSCO SHIPPING Holdings is:

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

0.17 = CN¥65b ÷ (CN¥510b - CN¥123b) (Based on the trailing twelve months to March 2025).

Therefore, COSCO SHIPPING Holdings has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Shipping industry average of 8.1% it's much better.

Check out our latest analysis for COSCO SHIPPING Holdings

Above you can see how the current ROCE for COSCO SHIPPING 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 COSCO SHIPPING Holdings .

So How Is COSCO SHIPPING Holdings' ROCE Trending?

Investors would be pleased with what's happening at COSCO SHIPPING Holdings. The data shows that returns on capital have increased substantially over the last five years to 17%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 106%. So we're very much inspired by what we're seeing at COSCO SHIPPING Holdings thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that COSCO SHIPPING 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. Therefore, we think it would be worth your time to check if these trends are going to continue.

One final note, you should learn about the 2 warning signs we've spotted with COSCO SHIPPING Holdings (including 1 which can't be ignored) .

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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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.