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    BYD Electronic (International) (HKG:285) Will Be Hoping To Turn Its Returns On Capital Around

    Simply Wall St·12/31/2025 01:59:36
    語音播報

    To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. 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 BYD Electronic (International) (HKG:285) and its ROCE trend, we weren't exactly thrilled.

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    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. The formula for this calculation on BYD Electronic (International) is:

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

    0.12 = CN¥4.1b ÷ (CN¥83b - CN¥47b) (Based on the trailing twelve months to June 2025).

    Thus, BYD Electronic (International) has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Communications industry average of 6.7% it's much better.

    See our latest analysis for BYD Electronic (International)

    roce
    SEHK:285 Return on Capital Employed December 31st 2025

    Above you can see how the current ROCE for BYD Electronic (International) compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for BYD Electronic (International) .

    The Trend Of ROCE

    In terms of BYD Electronic (International)'s historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 12% from 16% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

    While on the subject, we noticed that the ratio of current liabilities to total assets has risen to 57%, which has impacted the ROCE. If current liabilities hadn't increased as much as they did, the ROCE could actually be even lower. What this means is that in reality, a rather large portion of the business is being funded by the likes of the company's suppliers or short-term creditors, which can bring some risks of its own.

    The Bottom Line On BYD Electronic (International)'s ROCE

    Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for BYD Electronic (International). However, despite the promising trends, the stock has fallen 14% over the last five years, so there might be an opportunity here for astute investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

    If you're still interested in BYD Electronic (International) it's worth checking out our FREE intrinsic value approximation for 285 to see if it's trading at an attractive price in other respects.

    While BYD Electronic (International) isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.