Returns On Capital Signal Tricky Times Ahead For Tsaker New Energy Tech (HKG:1986)

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it’s a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating Tsaker New Energy Tech (HKG:1986), we don’t think it’s current trends fit the mold of a multi-bagger.

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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. The formula for this calculation on Tsaker New Energy Tech is:

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

0.0072 = CN¥17m ÷ (CN¥3.2b – CN¥908m) (Based on the trailing twelve months to June 2025).

Therefore, Tsaker New Energy Tech has an ROCE of 0.7%. Ultimately, that’s a low return and it under-performs the Chemicals industry average of 8.5%.

Check out our latest analysis for Tsaker New Energy Tech

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you’re interested in investigating Tsaker New Energy Tech’s past further, check out this free graph covering Tsaker New Energy Tech’s past earnings, revenue and cash flow.

The Trend Of ROCE

In terms of Tsaker New Energy Tech’s historical ROCE movements, the trend isn’t fantastic. Around five years ago the returns on capital were 24%, but since then they’ve fallen to 0.7%. Meanwhile, the business is utilizing more capital but this hasn’t moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

In Conclusion…

To conclude, we’ve found that Tsaker New Energy Tech is reinvesting in the business, but returns have been falling. Unsurprisingly then, the total return to shareholders over the last five years has been flat. All in all, the inherent trends aren’t typical of multi-baggers, so if that’s what you’re after, we think you might have more luck elsewhere.

If you’d like to know more about Tsaker New Energy Tech, we’ve spotted 2 warning signs, and 1 of them is potentially serious.

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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.