EPI (Holdings)'s (HKG:689) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at EPI (Holdings) (HKG:689) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for EPI (Holdings), this is the formula:

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

0.038 = HK$17m ÷ (HK$472m - HK$11m) (Based on the trailing twelve months to June 2025).

So, EPI (Holdings) has an ROCE of 3.8%. In absolute terms, that's a low return and it also under-performs the Oil and Gas industry average of 5.3%.

See our latest analysis for EPI (Holdings)

Historical performance is a great place to start when researching a stock so above you can see the gauge for EPI (Holdings)'s ROCE against it's prior returns. If you're interested in investigating EPI (Holdings)'s past further, check out this free graph covering EPI (Holdings)'s past earnings, revenue and cash flow.

What Can We Tell From EPI (Holdings)'s ROCE Trend?

EPI (Holdings) has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 3.8%, which is always encouraging. While returns have increased, the amount of capital employed by EPI (Holdings) has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. Because in the end, a business can only get so efficient.

The Bottom Line On EPI (Holdings)'s ROCE

To sum it up, EPI (Holdings) is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has dived 73% over the last five years, there may be other factors affecting the company's prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

If you want to know some of the risks facing EPI (Holdings) we've found 4 warning signs (1 is concerning!) that you should be aware of before investing here.

While EPI (Holdings) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.