Identifying stocks with the potential for significant long-term value multiplication involves analyzing key indicators, and Add New Energy Investment Holdings Group (HKG:2623) is catching attention with its positive trends in return on capital employed (ROCE). This metric reflects the company’s ability to generate pre-tax profits from the capital employed in its business, offering insights into its compounding capabilities and capacity for continuous reinvestment.
Add New Energy Investment Holdings Group’s ROCE stands at 19%, calculated as Earnings Before Interest and Tax (EBIT) divided by (Total Assets – Current Liabilities). In absolute terms, this indicates a satisfactory return, especially when compared to the Metals and Mining industry average of 8.7%.
Examining historical performance further supports the positive outlook, as the company has shifted from losses five years ago to a current ROCE of 19%. Notably, the capital employed has remained steady, showcasing efficiency in generating higher returns without requiring additional capital investment.
While the company’s improved efficiency is commendable, investors should be mindful that sustained high efficiency may signal a lack of internal investment opportunities for future growth. Despite a notable 81% stock decline over the last five years, the underlying fundamentals suggest that Add New Energy Investment Holdings Group warrants further investigation.
Investors are advised to consider potential warning signs, as outlined in our analysis, but the overall picture indicates that the company has become more adept at generating returns, making it a candidate for deeper exploration. For those interested in solid companies with strong balance sheets and high returns on equity, a free list is available for reference.