Return Trends At HK Electric Investments and HK Electric Investments (HKG:2638) Aren't Appealing

What trends should we look for it we want to identify stocks that can 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at HK Electric Investments and HK Electric Investments (HKG:2638) and its ROCE trend, we weren't exactly thrilled.

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What Is Return On Capital Employed (ROCE)?

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 HK Electric Investments and HK Electric Investments, this is the formula:

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

0.058 = HK$5.4b ÷ (HK$119b - HK$24b) (Based on the trailing twelve months to June 2025).

Therefore, HK Electric Investments and HK Electric Investments has an ROCE of 5.8%. Even though it's in line with the industry average of 5.5%, it's still a low return by itself.

View our latest analysis for HK Electric Investments and HK Electric Investments

In the above chart we have measured HK Electric Investments and HK Electric Investments' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for HK Electric Investments and HK Electric Investments .

The Trend Of ROCE

Things have been pretty stable at HK Electric Investments and HK Electric Investments, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if HK Electric Investments and HK Electric Investments doesn't end up being a multi-bagger in a few years time. That being the case, it makes sense that HK Electric Investments and HK Electric Investments has been paying out 82% of its earnings to its shareholders. Most shareholders probably know this and own the stock for its dividend.

The Key Takeaway

In a nutshell, HK Electric Investments and HK Electric Investments has been trudging along with the same returns from the same amount of capital over the last five years. Unsurprisingly, the stock has only gained 21% over the last five years, which potentially indicates that investors are accounting for this going forward. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

On a final note, we found 2 warning signs for HK Electric Investments and HK Electric Investments (1 shouldn't be ignored) you should be aware of.

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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.