The Return Trends At Hutchison Port Holdings Trust (SGX:NS8U) Look Promising

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Hutchison Port Holdings Trust's (SGX:NS8U) returns on capital, so let's have a look.

Our free stock report includes 3 warning signs investors should be aware of before investing in Hutchison Port Holdings Trust. Read for free now.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Hutchison Port Holdings Trust, this is the formula:

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

0.062 = HK$4.4b ÷ (HK$82b - HK$11b) (Based on the trailing twelve months to December 2024).

So, Hutchison Port Holdings Trust has an ROCE of 6.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 6.4%.

See our latest analysis for Hutchison Port Holdings Trust

In the above chart we have measured Hutchison Port Holdings Trust's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Hutchison Port Holdings Trust for free.

So How Is Hutchison Port Holdings Trust's ROCE Trending?

Hutchison Port Holdings Trust's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 50% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

Our Take On Hutchison Port Holdings Trust's ROCE

In summary, we're delighted to see that Hutchison Port Holdings Trust has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 122% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One final note, you should learn about the 3 warning signs we've spotted with Hutchison Port Holdings Trust (including 2 which can't be ignored) .

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.