Kam Hing International Holdings (HKG:2307) Is Doing The Right Things To Multiply Its Share Price

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. 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 Kam Hing International Holdings' (HKG:2307) returns on capital, so let's have a look.

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Understanding 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 Kam Hing International Holdings:

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

0.0019 = HK$3.8m ÷ (HK$3.5b - HK$1.4b) (Based on the trailing twelve months to June 2025).

Thus, Kam Hing International Holdings has an ROCE of 0.2%. Ultimately, that's a low return and it under-performs the Luxury industry average of 14%.

View our latest analysis for Kam Hing International Holdings

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Kam Hing International Holdings' past further, check out this free graph covering Kam Hing International Holdings' past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that Kam Hing International Holdings is reaping rewards from its investments and has now broken into profitability. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 0.2% on their capital employed. In regards to capital employed, Kam Hing International Holdings is using 34% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 41% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

What We Can Learn From Kam Hing International Holdings' ROCE

In summary, it's great to see that Kam Hing International Holdings has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 44% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

If you'd like to know about the risks facing Kam Hing International Holdings, we've discovered 3 warning signs that you should be aware of.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.