Why We Like The Returns At AYS Ventures Berhad (KLSE:AYS)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. And in light of that, the trends we're seeing at AYS Ventures Berhad's (KLSE:AYS) look very promising so lets take a look.

What is 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 AYS Ventures Berhad, this is the formula:

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

0.34 = RM130m ÷ (RM836m - RM453m) (Based on the trailing twelve months to September 2021).

Thus, AYS Ventures Berhad has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 4.2% earned by companies in a similar industry.

View our latest analysis for AYS Ventures Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of AYS Ventures Berhad, check out these free graphs here.

So How Is AYS Ventures Berhad's ROCE Trending?

AYS Ventures Berhad is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 34%. Basically the business is earning more per dollar of capital invested and in addition to that, 62% more capital is being employed now too. So we're very much inspired by what we're seeing at AYS Ventures Berhad thanks to its ability to profitably reinvest capital.

On a side note, we noticed that the improvement in ROCE appears to be partly fueled by an increase in current liabilities. Essentially the business now has suppliers or short-term creditors funding about 54% of its operations, which isn't ideal. And with current liabilities at those levels, that's pretty high.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what AYS Ventures Berhad has. Since the stock has returned a staggering 124% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if AYS Ventures Berhad can keep these trends up, it could have a bright future ahead.

On a final note, we found 5 warning signs for AYS Ventures Berhad (1 is concerning) you should be aware of.

AYS Ventures Berhad is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused 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.