Nasdaq
華爾街日報Returns At Chong Fai Jewellery Group Holdings (HKG:8537) Are On The Way Up
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at Chong Fai Jewellery Group Holdings (HKG:8537) so let's look a bit deeper.
Return On Capital Employed (ROCE): What Is It?
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 Chong Fai Jewellery Group Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.056 = HK$6.5m ÷ (HK$141m - HK$26m) (Based on the trailing twelve months to September 2025).
Thus, Chong Fai Jewellery Group Holdings has an ROCE of 5.6%. Ultimately, that's a low return and it under-performs the Luxury industry average of 14%.
View our latest analysis for Chong Fai Jewellery 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 Chong Fai Jewellery Group Holdings' past further, check out this free graph covering Chong Fai Jewellery Group Holdings' past earnings, revenue and cash flow.
The Trend Of ROCE
Chong Fai Jewellery 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 5.6% on its capital. And unsurprisingly, like most companies trying to break into the black, Chong Fai Jewellery Group Holdings is utilizing 35% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
On a related note, the company's ratio of current liabilities to total assets has decreased to 18%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance.
Our Take On Chong Fai Jewellery Group Holdings' ROCE
Long story short, we're delighted to see that Chong Fai Jewellery Group Holdings' reinvestment activities have paid off and the company is now profitable. Given the stock has declined 67% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
On a final note, we've found 2 warning signs for Chong Fai Jewellery Group Holdings that we think you should be aware of.
While Chong Fai Jewellery Group Holdings 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.
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.