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There's Been No Shortage Of Growth Recently For Cosmo Lady (China) Holdings' (HKG:2298) Returns On Capital

Simply Wall St · 1d ago

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Cosmo Lady (China) Holdings' (HKG:2298) returns on capital, so let's have a look.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Cosmo Lady (China) Holdings, this is the formula:

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

0.053 = CN¥134m ÷ (CN¥3.6b - CN¥1.1b) (Based on the trailing twelve months to June 2025).

So, Cosmo Lady (China) Holdings has an ROCE of 5.3%. Ultimately, that's a low return and it under-performs the Luxury industry average of 14%.

View our latest analysis for Cosmo Lady (China) Holdings

roce
SEHK:2298 Return on Capital Employed December 23rd 2025

In the above chart we have measured Cosmo Lady (China) 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 Cosmo Lady (China) Holdings .

How Are Returns Trending?

Shareholders will be relieved that Cosmo Lady (China) Holdings has broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 5.3% on its capital. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

Our Take On Cosmo Lady (China) Holdings' ROCE

To sum it up, Cosmo Lady (China) Holdings is collecting higher returns from the same amount of capital, and that's impressive. Although the company may be facing some issues elsewhere since the stock has plunged 79% in the last five years. Regardless, we think the underlying fundamentals warrant this stock for further investigation.

On a final note, we've found 1 warning sign for Cosmo Lady (China) Holdings that we think you should be aware of.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.