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Investors Met With Slowing Returns on Capital At Skyworth Group (HKG:751)

Simply Wall St · 1d ago

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Skyworth Group (HKG:751) and its ROCE trend, we weren't exactly thrilled.

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What Is 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. The formula for this calculation on Skyworth Group is:

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

0.028 = CN¥909m ÷ (CN¥75b - CN¥43b) (Based on the trailing twelve months to June 2025).

Thus, Skyworth Group has an ROCE of 2.8%. Ultimately, that's a low return and it under-performs the Consumer Durables industry average of 11%.

View our latest analysis for Skyworth Group

roce
SEHK:751 Return on Capital Employed December 23rd 2025

Above you can see how the current ROCE for Skyworth Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Skyworth Group .

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Skyworth Group. Over the past five years, ROCE has remained relatively flat at around 2.8% and the business has deployed 36% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

On a side note, Skyworth Group's current liabilities are still rather high at 57% of total assets. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

In Conclusion...

Long story short, while Skyworth Group has been reinvesting its capital, the returns that it's generating haven't increased. Yet to long term shareholders the stock has gifted them an incredible 119% return in the last five years, so the market appears to be rosy about its future. But if the trajectory of these underlying trends continue, we think the likelihood of it being a multi-bagger from here isn't high.

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

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