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Zhongsheng Group Holdings (HKG:881) Might Be Having Difficulty Using Its Capital Effectively

Simply Wall St · 1d ago

To find a multi-bagger stock, what are the underlying trends we should look for in a business? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Although, when we looked at Zhongsheng Group Holdings (HKG:881), it didn't seem to tick all of these boxes.

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

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 Zhongsheng Group Holdings is:

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

0.064 = CN¥4.4b ÷ (CN¥108b - CN¥39b) (Based on the trailing twelve months to June 2025).

Therefore, Zhongsheng Group Holdings has an ROCE of 6.4%. Ultimately, that's a low return and it under-performs the Specialty Retail industry average of 9.1%.

View our latest analysis for Zhongsheng Group Holdings

roce
SEHK:881 Return on Capital Employed December 16th 2025

In the above chart we have measured Zhongsheng Group Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Zhongsheng Group Holdings .

What Can We Tell From Zhongsheng Group Holdings' ROCE Trend?

When we looked at the ROCE trend at Zhongsheng Group Holdings, we didn't gain much confidence. Around five years ago the returns on capital were 21%, but since then they've fallen to 6.4%. 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.

The Key Takeaway

In summary, Zhongsheng Group Holdings is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 75% in the last five years. 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.

One more thing to note, we've identified 1 warning sign with Zhongsheng Group Holdings and understanding it should be part of your investment process.

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