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Investors Will Want SiS Mobile Holdings' (HKG:1362) Growth In ROCE To Persist
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. Speaking of which, we noticed some great changes in SiS Mobile Holdings' (HKG:1362) returns on capital, so let's have a look.
Understanding 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. To calculate this metric for SiS Mobile Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0051 = HK$865k ÷ (HK$218m - HK$48m) (Based on the trailing twelve months to June 2025).
So, SiS Mobile Holdings has an ROCE of 0.5%. Ultimately, that's a low return and it under-performs the Electronic industry average of 7.8%.
See our latest analysis for SiS Mobile Holdings
Historical performance is a great place to start when researching a stock so above you can see the gauge for SiS Mobile Holdings' ROCE against it's prior returns. If you'd like to look at how SiS Mobile Holdings has performed in the past in other metrics, you can view this free graph of SiS Mobile Holdings' past earnings, revenue and cash flow.
The Trend Of ROCE
The fact that SiS Mobile Holdings is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 0.5% on its capital. And unsurprisingly, like most companies trying to break into the black, SiS Mobile Holdings is utilizing 89% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.
One more thing to note, SiS Mobile Holdings has decreased current liabilities to 22% 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.
The Bottom Line On SiS Mobile Holdings' ROCE
To the delight of most shareholders, SiS Mobile Holdings has now broken into profitability. Since the stock has returned a staggering 124% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if SiS Mobile Holdings can keep these trends up, it could have a bright future ahead.
On a final note, we've found 3 warning signs for SiS Mobile Holdings that we think 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.
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.