If you want to identify your next multibagger, there are some important trends to look out for. One common approach is to look for companies that: Return value Capital employed increasing with growth (ROCE) amount of capital employed. Simply put, this type of business is a compound interest machine, meaning you are continually reinvesting your earnings at an ever-higher rate of return. Speaking of which, I noticed some big changes. SIIC Kankyo Holdings Let’s take a look at (SGX:BHK)’s return on equity.
What is return on capital employed (ROCE)?
In case you aren’t familiar, ROCE is a metric that measures how much pre-tax profit (as a percentage) a company earns on the capital invested in its business. The formula for SIIC Kankyo Holdings is:
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.067 = 2.2 billion yen ÷ (42 billion yen – 9.2 billion yen) (Based on the previous 12 months to June 2023).
therefore, SIIC Environmental Holdings’ ROCE is 6.7%. This alone is a low return on capital, but it is comparable to the industry’s average return of 7.0%.
Check out our latest analysis for SIIC Kankyo Holdings.
Past performance is a great starting point when researching a stock. So, above, you can see a measure of SIIC Environmental Holdings’s ROCE relative to past returns. To learn more about SIIC Kankyo Holdings’ past earnings, revenue and cash flow, check these out. free Click here for the graph.
What can we learn from SIIC Kankyo Holdings’ ROCE trend?
In absolute terms, the ROCE isn’t high, but we’d expect it to be moving in the right direction. Over the past five years, his return on capital employed has increased significantly to 6.7%. It is worth noting that the company has virtually increased its return per dollar of capital employed, and the amount of capital has also increased by 61%. So we’re very inspired by what we’re seeing at SIIC Environmental Holdings because of its ability to profitably reinvest capital.
Conclusion on SIIC Kankyo Holdings’ ROCE
Overall, it’s great to see SIIC Environmental Holdings benefiting from previous investments and growing its capital base. There may also be an opportunity here, as the stock is down 29% over the past five years. Therefore, it seems warranted to investigate this company further to determine whether these trends continue.
Almost every company faces some kind of risk, so it’s worth knowing what they are. 2 warning signs for SIIC Environmental Holdings (1 of them is important!) You should know about this.
While SIIC Environmental Holdings doesn’t currently have the highest profit margin, we’ve compiled a list of companies that currently have a return on equity of 25% or higher.check this out free I’ll list them 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.