China ITS (Holdings) (HKG:1900) Is Looking To Continue Growing Its Returns On Capital

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, China ITS (Holdings) (HKG:1900) looks quite promising in regards to its trends of return on capital.

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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 China ITS (Holdings), this is the formula:

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

0.086 = CN¥237m ÷ (CN¥3.7b - CN¥1.0b) (Based on the trailing twelve months to June 2025).

Therefore, China ITS (Holdings) has an ROCE of 8.6%. In absolute terms, that's a low return, but it's much better than the IT industry average of 6.3%.

Check out our latest analysis for China ITS (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'd like to look at how China ITS (Holdings) has performed in the past in other metrics, you can view this free graph of China ITS (Holdings)'s past earnings, revenue and cash flow.

What Does the ROCE Trend For China ITS (Holdings) Tell Us?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 8.6%. The amount of capital employed has increased too, by 31%. So we're very much inspired by what we're seeing at China ITS (Holdings) thanks to its ability to profitably reinvest capital.

One more thing to note, China ITS (Holdings) has decreased current liabilities to 27% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.

In Conclusion...

All in all, it's terrific to see that China ITS (Holdings) is reaping the rewards from prior investments and is growing its capital base. Since the stock has only returned 35% to shareholders over the last five years, the promising fundamentals may not be recognized yet by investors. So with that in mind, we think the stock deserves further research.

China ITS (Holdings) does have some risks though, and we've spotted 1 warning sign for China ITS (Holdings) that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.