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Investors Will Want China High Precision Automation Group's (HKG:591) Growth In ROCE To Persist

Simply Wall St · 2d ago

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at China High Precision Automation Group (HKG:591) and its trend of ROCE, we really liked what we saw.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on China High Precision Automation Group is:

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

0.009 = CN¥16m ÷ (CN¥1.8b - CN¥78m) (Based on the trailing twelve months to June 2025).

So, China High Precision Automation Group has an ROCE of 0.9%. Ultimately, that's a low return and it under-performs the Electronic industry average of 7.8%.

See our latest analysis for China High Precision Automation Group

roce
SEHK:591 Return on Capital Employed January 5th 2026

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 China High Precision Automation Group's past further, check out this free graph covering China High Precision Automation Group's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Shareholders will be relieved that China High Precision Automation Group has broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 0.9%, which is always encouraging. While returns have increased, the amount of capital employed by China High Precision Automation Group has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

As discussed above, China High Precision Automation Group appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And a remarkable 170% total return over the last year tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 1 warning sign facing China High Precision Automation Group that you might find interesting.

While China High Precision Automation 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.