June 21, 2024

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We Like These Underlying Return On Capital Trends At Hamaton Automotive Technology (SZSE:300643)

3 min read

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we’d want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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 Hamaton Automotive Technology’s (SZSE:300643) returns on capital, so let’s have a look.

What Is Return On Capital Employed (ROCE)?

For those who don’t know, ROCE is a measure of a company’s yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Hamaton Automotive Technology:

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

0.10 = CN¥110m ÷ (CN¥1.4b – CN¥280m) (Based on the trailing twelve months to September 2023).

So, Hamaton Automotive Technology has an ROCE of 10%. On its own, that’s a standard return, however it’s much better than the 6.6% generated by the Auto Components industry.

See our latest analysis for Hamaton Automotive Technology

roce
SZSE:300643 Return on Capital Employed April 16th 2024

In the above chart we have measured Hamaton Automotive Technology’s prior ROCE against its prior performance, but the future is arguably more important. If you’d like, you can check out the forecasts from the analysts covering Hamaton Automotive Technology for free.

What Does the ROCE Trend For Hamaton Automotive Technology Tell Us?

Investors would be pleased with what’s happening at Hamaton Automotive Technology. The data shows that returns on capital have increased substantially over the last five years to 10%. The company is effectively making more money per dollar of capital used, and it’s worth noting that the amount of capital has increased too, by 158%. This can indicate that there’s plenty of opportunities to invest capital internally and at ever higher rates, a combination that’s common among multi-baggers.

The Bottom Line On Hamaton Automotive Technology’s ROCE

All in all, it’s terrific to see that Hamaton Automotive Technology is reaping the rewards from prior investments and is growing its capital base. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. 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 Hamaton Automotive Technology, we’ve discovered 1 warning sign that you should be aware of.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Hamaton Automotive Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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