Legion Consortium (HKG:2129) May Have Issues Allocating Its Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. In light of that, when we looked at Legion Consortium (HKG:2129) and its ROCE trend, we weren't exactly thrilled.

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Return On Capital Employed (ROCE): What Is It?

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 Legion Consortium:

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

0.012 = S$731k ÷ (S$73m - S$11m) (Based on the trailing twelve months to June 2025).

So, Legion Consortium has an ROCE of 1.2%. In absolute terms, that's a low return and it also under-performs the Transportation industry average of 6.0%.

View our latest analysis for Legion Consortium

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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Legion Consortium.

How Are Returns Trending?

When we looked at the ROCE trend at Legion Consortium, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 1.2% from 24% five years ago. However it looks like Legion Consortium might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Legion Consortium's ROCE

To conclude, we've found that Legion Consortium is reinvesting in the business, but returns have been falling. And in the last five years, the stock has given away 37% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Legion Consortium has the makings of a multi-bagger.

On a final note, we found 5 warning signs for Legion Consortium (2 are a bit unpleasant) you should be aware of.

While Legion Consortium 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.