Returns At KPS Consortium Berhad (KLSE:KPSCB) Appear To Be Weighed Down

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. However, after briefly looking over the numbers, we don't think KPS Consortium Berhad (KLSE:KPSCB) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

We've discovered 2 warning signs about KPS Consortium Berhad. View them for free.

What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for KPS Consortium Berhad:

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

0.052 = RM19m ÷ (RM515m - RM158m) (Based on the trailing twelve months to December 2024).

Thus, KPS Consortium Berhad has an ROCE of 5.2%. Ultimately, that's a low return and it under-performs the Trade Distributors industry average of 9.6%.

View our latest analysis for KPS Consortium Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for KPS Consortium Berhad's ROCE against it's prior returns. If you'd like to look at how KPS Consortium Berhad has performed in the past in other metrics, you can view this free graph of KPS Consortium Berhad's past earnings, revenue and cash flow.

How Are Returns Trending?

Things have been pretty stable at KPS Consortium Berhad, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at KPS Consortium Berhad in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

On a side note, KPS Consortium Berhad has done well to reduce current liabilities to 31% of total assets over the last five years. Effectively suppliers now fund less of the business, which can lower some elements of risk.

The Key Takeaway

In a nutshell, KPS Consortium Berhad has been trudging along with the same returns from the same amount of capital over the last five years. And investors may be recognizing these trends since the stock has only returned a total of 20% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

On a final note, we found 2 warning signs for KPS Consortium Berhad (1 can't be ignored) you should be aware of.

While KPS Consortium Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.