Hotel Properties' (SGX:H15) Returns On Capital Are Heading Higher

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Hotel Properties (SGX:H15) looks quite promising in regards to its trends of return on capital.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Hotel Properties:

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

0.022 = S$95m ÷ (S$4.5b - S$196m) (Based on the trailing twelve months to June 2025).

Thus, Hotel Properties has an ROCE of 2.2%. In absolute terms, that's a low return and it also under-performs the Hospitality industry average of 3.9%.

Check out our latest analysis for Hotel Properties

Historical performance is a great place to start when researching a stock so above you can see the gauge for Hotel Properties' ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Hotel Properties.

How Are Returns Trending?

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 2.2%. The amount of capital employed has increased too, by 37%. So we're very much inspired by what we're seeing at Hotel Properties thanks to its ability to profitably reinvest capital.

What We Can Learn From Hotel Properties' ROCE

All in all, it's terrific to see that Hotel Properties is reaping the rewards from prior investments and is growing its capital base. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 70% return over the last five years. In light of that, we think it's worth looking further into this stock because if Hotel Properties can keep these trends up, it could have a bright future ahead.

One more thing: We've identified 3 warning signs with Hotel Properties (at least 1 which is a bit concerning) , and understanding them would certainly be useful.

While Hotel Properties 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.

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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.