Investors Will Want Sarawak Consolidated Industries Berhad's (KLSE:SCIB) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So when we looked at Sarawak Consolidated Industries Berhad (KLSE:SCIB) and its trend of ROCE, we really liked what we saw.

We've discovered 1 warning sign about Sarawak Consolidated Industries Berhad. View them for free.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Sarawak Consolidated Industries Berhad:

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

0.05 = RM10m ÷ (RM296m - RM90m) (Based on the trailing twelve months to December 2024).

Thus, Sarawak Consolidated Industries Berhad has an ROCE of 5.0%. In absolute terms, that's a low return and it also under-performs the Building industry average of 7.0%.

Check out our latest analysis for Sarawak Consolidated Industries Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Sarawak Consolidated Industries Berhad's ROCE against it's prior returns. If you're interested in investigating Sarawak Consolidated Industries Berhad's past further, check out this free graph covering Sarawak Consolidated Industries Berhad's past earnings, revenue and cash flow.

What Can We Tell From Sarawak Consolidated Industries Berhad's ROCE Trend?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. The data shows that returns on capital have increased substantially over the last five years to 5.0%. The amount of capital employed has increased too, by 186%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

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 Sarawak Consolidated Industries Berhad has. Astute investors may have an opportunity here because the stock has declined 67% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know about the risks facing Sarawak Consolidated Industries Berhad, we've discovered 1 warning sign 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.

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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.