Returns Are Gaining Momentum At Emperor Watch & Jewellery (HKG:887)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Emperor Watch & Jewellery (HKG:887) and its trend of ROCE, we really liked what we saw.

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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. Analysts use this formula to calculate it for Emperor Watch & Jewellery:

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

0.062 = HK$364m ÷ (HK$6.4b - HK$569m) (Based on the trailing twelve months to June 2025).

Thus, Emperor Watch & Jewellery has an ROCE of 6.2%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 8.0%.

View our latest analysis for Emperor Watch & Jewellery

Historical performance is a great place to start when researching a stock so above you can see the gauge for Emperor Watch & Jewellery's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Emperor Watch & Jewellery.

How Are Returns Trending?

The fact that Emperor Watch & Jewellery is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 6.2% on its capital. And unsurprisingly, like most companies trying to break into the black, Emperor Watch & Jewellery is utilizing 27% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 8.8%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

Our Take On Emperor Watch & Jewellery's ROCE

To the delight of most shareholders, Emperor Watch & Jewellery has now broken into profitability. Since the stock has returned a staggering 229% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you'd like to know about the risks facing Emperor Watch & Jewellery, we've discovered 1 warning sign that you should be aware of.

While Emperor Watch & Jewellery may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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 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.