Hutchison Port Holdings Trust (SGX:NS8U) Hasn't Managed To Accelerate Its Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Hutchison Port Holdings Trust (SGX:NS8U) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

What Is 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 Hutchison Port Holdings Trust is:

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

0.046 = HK$3.4b ÷ (HK$84b - HK$11b) (Based on the trailing twelve months to December 2023).

Therefore, Hutchison Port Holdings Trust has an ROCE of 4.6%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 6.2%.

Check out our latest analysis for Hutchison Port Holdings Trust

Above you can see how the current ROCE for Hutchison Port Holdings Trust 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 Hutchison Port Holdings Trust .

What Can We Tell From Hutchison Port Holdings Trust's ROCE Trend?

There hasn't been much to report for Hutchison Port Holdings Trust's returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Hutchison Port Holdings Trust in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger. On top of that you'll notice that Hutchison Port Holdings Trust has been paying out a large portion (168%) of earnings in the form of dividends to shareholders. Most shareholders probably know this and own the stock for its dividend.

In Conclusion...

We can conclude that in regards to Hutchison Port Holdings Trust's returns on capital employed and the trends, there isn't much change to report on. And in the last five years, the stock has given away 14% so the market doesn't look too hopeful on these trends strengthening any time soon. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you want to know some of the risks facing Hutchison Port Holdings Trust we've found 3 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

While Hutchison Port Holdings Trust 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.