Here's What Inta Bina Group Berhad's (KLSE:INTA) Strong Returns On Capital Mean

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Inta Bina Group Berhad's (KLSE:INTA) ROCE trend, we were very happy with what we saw.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Inta Bina Group Berhad is:

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

0.20 = RM40m ÷ (RM481m - RM284m) (Based on the trailing twelve months to June 2024).

Therefore, Inta Bina Group Berhad has an ROCE of 20%. That's a fantastic return and not only that, it outpaces the average of 8.9% earned by companies in a similar industry.

See our latest analysis for Inta Bina Group Berhad

Above you can see how the current ROCE for Inta Bina Group Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Inta Bina Group Berhad .

What Can We Tell From Inta Bina Group Berhad's ROCE Trend?

In terms of Inta Bina Group Berhad's history of ROCE, it's quite impressive. Over the past five years, ROCE has remained relatively flat at around 20% and the business has deployed 40% more capital into its operations. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. You'll see this when looking at well operated businesses or favorable business models.

On a side note, Inta Bina Group Berhad's current liabilities are still rather high at 59% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

The Key Takeaway

In short, we'd argue Inta Bina Group Berhad has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. And long term investors would be thrilled with the 133% return they've received over the last five years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Like most companies, Inta Bina Group Berhad does come with some risks, and we've found 4 warning signs that you should be aware of.

Inta Bina Group 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.