We Like These Underlying Return On Capital Trends At Ocean Line Port Development (HKG:8502)

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 Ocean Line Port Development (HKG:8502) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Ocean Line Port Development, this is the formula:

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

0.14 = CN¥95m ÷ (CN¥813m - CN¥151m) (Based on the trailing twelve months to December 2022).

Therefore, Ocean Line Port Development has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Infrastructure industry average of 5.2% it's much better.

View our latest analysis for Ocean Line Port Development

Historical performance is a great place to start when researching a stock so above you can see the gauge for Ocean Line Port Development's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Ocean Line Port Development, check out these free graphs here.

So How Is Ocean Line Port Development's ROCE Trending?

We like the trends that we're seeing from Ocean Line Port Development. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The amount of capital employed has increased too, by 102%. 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 Key Takeaway

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 Ocean Line Port Development has. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 23% return over the last three years. In light of that, we think it's worth looking further into this stock because if Ocean Line Port Development can keep these trends up, it could have a bright future ahead.

On a final note, we've found 1 warning sign for Ocean Line Port Development that we think you should be aware of.

While Ocean Line Port Development isn't earning the highest return, check out this free list of companies that are 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.