Investors Met With Slowing Returns on Capital At Beijing Enterprises Holdings (HKG:392)
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. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at Beijing Enterprises Holdings (HKG:392), it didn't seem to tick all of these boxes.
What Is 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. Analysts use this formula to calculate it for Beijing Enterprises Holdings:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.02 = CN¥3.1b ÷ (CN¥216b - CN¥64b) (Based on the trailing twelve months to June 2025).
Therefore, Beijing Enterprises Holdings has an ROCE of 2.0%. Ultimately, that's a low return and it under-performs the Gas Utilities industry average of 7.3%.
See our latest analysis for Beijing Enterprises Holdings
Above you can see how the current ROCE for Beijing Enterprises Holdings compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Beijing Enterprises Holdings for free.
So How Is Beijing Enterprises Holdings' ROCE Trending?
The returns on capital haven't changed much for Beijing Enterprises Holdings in recent years. Over the past five years, ROCE has remained relatively flat at around 2.0% and the business has deployed 21% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
The Key Takeaway
As we've seen above, Beijing Enterprises Holdings' returns on capital haven't increased but it is reinvesting in the business. Since the stock has gained an impressive 94% over the last five years, investors must think there's better things to come. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.
On a final note, we found 2 warning signs for Beijing Enterprises Holdings (1 is significant) you should be aware of.
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.