Return Trends At COSCO SHIPPING Ports (HKG:1199) Aren't Appealing

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. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Having said that, from a first glance at COSCO SHIPPING Ports (HKG:1199) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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Understanding Return On Capital Employed (ROCE)

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. The formula for this calculation on COSCO SHIPPING Ports is:

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

0.022 = US$243m ÷ (US$13b - US$1.6b) (Based on the trailing twelve months to September 2025).

Therefore, COSCO SHIPPING Ports has an ROCE of 2.2%. In absolute terms, that's a low return and it also under-performs the Infrastructure industry average of 4.9%.

Check out our latest analysis for COSCO SHIPPING Ports

Above you can see how the current ROCE for COSCO SHIPPING Ports compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering COSCO SHIPPING Ports for free.

What Can We Tell From COSCO SHIPPING Ports' ROCE Trend?

Over the past five years, COSCO SHIPPING Ports' ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if COSCO SHIPPING Ports doesn't end up being a multi-bagger in a few years time. This probably explains why COSCO SHIPPING Ports is paying out 41% of its income to shareholders in the form of dividends. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.

The Key Takeaway

We can conclude that in regards to COSCO SHIPPING Ports' returns on capital employed and the trends, there isn't much change to report on. Although the market must be expecting these trends to improve because the stock has gained 52% over the last five years. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a final note, we've found 1 warning sign for COSCO SHIPPING Ports that we think you should be aware of.

While COSCO SHIPPING Ports 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.