Hutchison Port Holdings Trust (SGX:NS8U) Is Doing The Right Things To Multiply Its Share Price

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. So on that note, Hutchison Port Holdings Trust (SGX:NS8U) looks quite promising in regards to its trends of return on capital.

What Is 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 Hutchison Port Holdings Trust is:

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

0.055 = HK$3.6b ÷ (HK$81b - HK$15b) (Based on the trailing twelve months to June 2024).

Therefore, Hutchison Port Holdings Trust has an ROCE of 5.5%. In absolute terms, that's a low return but it's around the Infrastructure industry average of 6.5%.

View 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're interested, you can view the analysts predictions in our free analyst report for Hutchison Port Holdings Trust .

How Are Returns Trending?

You'd find it hard not to be impressed with the ROCE trend at Hutchison Port Holdings Trust. The figures show that over the last five years, returns on capital have grown by 30%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Hutchison Port Holdings Trust appears to been achieving more with less, since the business is using 21% less capital to run its operation. Hutchison Port Holdings Trust may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

The Key Takeaway

In summary, it's great to see that Hutchison Port Holdings Trust has been able to turn things around and earn higher returns on lower amounts of capital. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 52% return over the last five years. In light of that, we think it's worth looking further into this stock because if Hutchison Port Holdings Trust can keep these trends up, it could have a bright future ahead.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Hutchison Port Holdings Trust (of which 1 is significant!) that you should know about.

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.