The Return Trends At Cathay Pacific Airways (HKG:293) Look Promising

There are a few key trends to look for if we want to identify the next multi-bagger. 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. With that in mind, we've noticed some promising trends at Cathay Pacific Airways (HKG:293) so let's look a bit deeper.

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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 Cathay Pacific Airways is:

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

0.11 = HK$13b ÷ (HK$170b - HK$53b) (Based on the trailing twelve months to June 2025).

So, Cathay Pacific Airways has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 9.0% generated by the Airlines industry.

View our latest analysis for Cathay Pacific Airways

Above you can see how the current ROCE for Cathay Pacific Airways compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Cathay Pacific Airways .

So How Is Cathay Pacific Airways' ROCE Trending?

Shareholders will be relieved that Cathay Pacific Airways has broken into profitability. The company now earns 11% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. Because in the end, a business can only get so efficient.

Our Take On Cathay Pacific Airways' ROCE

To sum it up, Cathay Pacific Airways is collecting higher returns from the same amount of capital, and that's impressive. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Cathay Pacific Airways can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for Cathay Pacific Airways you'll probably want to know about.

While Cathay Pacific Airways may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.