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The Return Trends At China Coal Energy (HKG:1898) Look Promising

Simply Wall St · 5d ago

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. Speaking of which, we noticed some great changes in China Coal Energy's (HKG:1898) returns on capital, so let's have a look.

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Understanding 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 China Coal Energy is:

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

0.098 = CN¥25b ÷ (CN¥367b - CN¥108b) (Based on the trailing twelve months to September 2025).

Therefore, China Coal Energy has an ROCE of 9.8%. In absolute terms, that's a low return, but it's much better than the Oil and Gas industry average of 5.3%.

Check out our latest analysis for China Coal Energy

roce
SEHK:1898 Return on Capital Employed January 6th 2026

Above you can see how the current ROCE for China Coal Energy 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 China Coal Energy .

How Are Returns Trending?

We're glad to see that ROCE is heading in the right direction, even if it is still low at the moment. Over the last five years, returns on capital employed have risen substantially to 9.8%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 23%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On China Coal Energy's ROCE

To sum it up, China Coal Energy has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 468% total return over the last five years 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.

China Coal Energy does have some risks though, and we've spotted 1 warning sign for China Coal Energy that you might be interested in.

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.