Yihai International Holding (HKG:1579) May Have Issues Allocating Its Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Yihai International Holding (HKG:1579), they do have a high ROCE, but we weren't exactly elated from how returns are trending.AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. Return On Capital Employed (ROCE): What Is It? If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Yihai International Holding, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.23 = CN¥1.1b ÷ (CN¥5.4b - CN¥559m) (Based on the trailing twelve months to June 2025). So, Yihai International Holding has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Food industry average of 13%. View our latest analysis for Yihai International Holding SEHK:1579 Return on Capital Employed September 20th 2025 Above you can see how the current ROCE for Yihai International Holding 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 Yihai International Holding . So How Is Yihai International Holding's ROCE Trending? On the surface, the trend of ROCE at Yihai International Holding doesn't inspire confidence. To be more specific, while the ROCE is still high, it's fallen from 41% where it was five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line. The Bottom Line To conclude, we've found that Yihai International Holding is reinvesting in the business, but returns have been falling. It seems that investors have little hope of these trends getting any better and that may have partly contributed to the stock collapsing 87% in the last five years. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere. If you'd like to know about the risks facing Yihai International Holding, we've discovered 1 warning sign that you should be aware of. High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.