There's Been No Shortage Of Growth Recently For Golik Holdings' (HKG:1118) Returns On Capital

What are the early trends we should look for to identify a stock that could multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Speaking of which, we noticed some great changes in Golik Holdings' (HKG:1118) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Golik Holdings:

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

0.13 = HK$239m ÷ (HK$2.5b - HK$746m) (Based on the trailing twelve months to June 2025).

Thus, Golik Holdings has an ROCE of 13%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Metals and Mining industry average of 12%.

See our latest analysis for Golik Holdings

Historical performance is a great place to start when researching a stock so above you can see the gauge for Golik Holdings' 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 Golik Holdings.

The Trend Of ROCE

We like the trends that we're seeing from Golik Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 13%. The amount of capital employed has increased too, by 47%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

One more thing to note, Golik Holdings has decreased current liabilities to 29% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

In Conclusion...

To sum it up, Golik Holdings has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has returned a staggering 139% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

On a separate note, we've found 2 warning signs for Golik Holdings you'll probably want to know about.

While Golik Holdings isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.