Stock Analysis of Nexteer Automotive Group (HKG:1316)
The Nexteer Automotive Group, based in Hong Kong (HKG:1316), is currently encountering challenges in effectively allocating its capital. These challenges are evident in the declining return on capital employed (ROCE) and the decrease in capital employed. These trends indicate a potential decline in the company’s performance, which could be a cause for concern for investors.
Understanding Return On Capital Employed (ROCE)
ROCE is a measure of a company’s ability to generate pre-tax profits from the capital it has invested in its business. In the case of Nexteer Automotive Group, the current ROCE stands at 2.9%, which is significantly lower than the industry average of 6.4%. This indicates that the company is earning less from its investments compared to its peers in the Auto Components industry.
Trending ROCE for Nexteer Automotive Group
The downward trend in ROCE for Nexteer Automotive Group over the past five years is a cause for caution. The returns on capital have decreased from 18% to the current 2.9%, while the amount of capital employed has remained relatively steady. This suggests that the company may not be growing, and it could be facing pressure on its margins due to competition. As a result, it is unlikely to be a lucrative investment for shareholders in the long term.
Impact on Investors
Long-term shareholders of Nexteer Automotive Group have experienced a 51% depreciation in their investment over the last five years, indicating that the market does not favour the company’s current performance. Unless there is a positive turnaround in the company’s financial trends, it might be wise for investors to explore other potential investment opportunities.
Warnings and Recommendations
In addition to the declining performance, there are warning signs for Nexteer Automotive Group that investors should be aware of. While the company may not be earning the highest return, there are other companies in the market that are performing well and may offer better investment prospects. It is recommended for investors to explore other options and conduct a comprehensive analysis of potential investment opportunities.
Final Thoughts
The declining returns on capital employed and the stagnant capital employed are indicators that Nexteer Automotive Group may not be a growth stock. Unless there is a reversal in these trends, it is advisable for investors to consider alternative investment opportunities.
About Nexteer Automotive Group (HKG:1316)
Nexteer Automotive Group is a motion control technology company that develops, manufactures, and supplies advanced steering and driveline systems to original equipment manufacturers worldwide. The company has a solid balance sheet with moderate growth potential, offering a valuable opportunity for investors who are willing to explore this market.
Conclusion
The challenges faced by Nexteer Automotive Group in allocating its capital effectively are evident in its declining ROCE and stagnant capital employed. As investors consider their options, it is crucial to conduct a thorough analysis of the company’s financial health and explore other opportunities in the market.
For concerns or feedback on this article, please feel free to get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. Please note that our analysis is based on historical data and analyst forecasts, and it does not constitute financial advice. Simply Wall St aims to provide long-term focused analysis driven by fundamental data. We do not factor in the latest price-sensitive company announcements or qualitative material, and we do not hold any position in the stocks mentioned in our articles.