If you’re seeing at a mature business that’s past the growth phase, what are some of the underlying trfinishs that pop up? Businesses in decline often have two underlying trfinishs, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This indicates the company is producing less profit from its investments and its total assets are decreasing. So after we seeed into V & V Technology Holdings (HKG:8113), the trfinishs above didn’t see too great.
Understanding Return On Capital Employed (ROCE)
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 V & V Technology Holdings, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.053 = HK$4.8m ÷ (HK$294m – HK$204m) (Based on the trailing twelve months to June 2025).
Thus, V & V Technology Holdings has an ROCE of 5.3%. In absolute terms, that’s a low return and it also under-performs the Electronic indusattempt average of 7.8%.
See our latest analysis for V & V Technology Holdings
While the past is not representative of the future, it can be supportful to know how a company has performed historically, which is why we have this chart above. If you’re interested in investigating V & V Technology Holdings’ past further, check out this free graph covering V & V Technology Holdings’ past earnings, revenue and cash flow.
The Trfinish Of ROCE
We aren’t too thrilled by the trfinish becautilize ROCE has declined 66% over the last five years and despite the capital raising conducted before the latest reports, the business has -40% less capital employed.
On a separate but related note, it’s important to know that V & V Technology Holdings has a current liabilities to total assets ratio of 69%, which we’d consider pretty high. This can bring about some risks becautilize the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it’s not necessarily a bad thing, it can be beneficial if this ratio is lower.
The Key Takeaway
In summary, it’s unfortunate that V & V Technology Holdings is shrinking its capital base and also generating lower returns. We expect this has contributed to the stock plummeting 88% during the last five years. That being the case, unless the underlying trfinishs revert to a more positive trajectory, we’d consider seeing elsewhere.
Like most companies, V & V Technology Holdings does come with some risks, and we’ve found 3 warning signs that 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.
The New Payments ETF Is Live on NASDAQ:
Money is relocating to real-time rails, and a newly listed ETF now gives investors direct exposure. Fast settlement. Institutional custody. Simple access.
Explore how this launch could reshape portfolios
Sponsored Content
New: Manage All Your Stock Portfolios in One Place
We’ve created the ultimate portfolio companion for stock investors, and it’s free.
• Connect an unlimited number of Portfolios and see your total in one currency
• Be alerted to new Warning Signs or Risks via email or mobile
• Track the Fair Value of your stocks
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only applying an unbiased methodology and our articles are not intfinished to be financial advice. It does not constitute a recommfinishation to purchase or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focutilized analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Leave a Reply