Dragon Rise Group Holdings (HKG:6829) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Dragon Rise Group Holdings' (HKG:6829) returns on capital, so let's have a look.

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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 Dragon Rise Group Holdings:

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

0.017 = HK$5.6m ÷ (HK$481m - HK$152m) (Based on the trailing twelve months to September 2025).

So, Dragon Rise Group Holdings has an ROCE of 1.7%. Ultimately, that's a low return and it under-performs the Construction industry average of 5.3%.

View our latest analysis for Dragon Rise Group 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 Dragon Rise Group Holdings' past further, check out this free graph covering Dragon Rise Group Holdings' past earnings, revenue and cash flow.

What Can We Tell From Dragon Rise Group Holdings' ROCE Trend?

Dragon Rise Group Holdings has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 1.7% on its capital. In addition to that, Dragon Rise Group Holdings is employing 22% more capital than previously which is expected of a company that's trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 32% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

The Bottom Line

Long story short, we're delighted to see that Dragon Rise Group Holdings' reinvestment activities have paid off and the company is now profitable. And a remarkable 251% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Dragon Rise Group Holdings can keep these trends up, it could have a bright future ahead.

On a final note, we've found 2 warning signs for Dragon Rise Group Holdings that we think you should be aware of.

While Dragon Rise Group 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.