Stock Analysis

Seacera Group Berhad (KLSE:SEACERA) Hasn't Managed To Accelerate Its Returns

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If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think Seacera Group Berhad (KLSE:SEACERA) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Seacera Group Berhad, this is the formula:

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

0.012 = RM9.5m ÷ (RM824m - RM24m) (Based on the trailing twelve months to December 2022).

So, Seacera Group Berhad has an ROCE of 1.2%. In absolute terms, that's a low return and it also under-performs the Building industry average of 6.2%.

View our latest analysis for Seacera Group Berhad

KLSE:SEACERA Return on Capital Employed March 29th 2023

Historical performance is a great place to start when researching a stock so above you can see the gauge for Seacera Group Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Seacera Group Berhad, check out these free graphs here.

What Does the ROCE Trend For Seacera Group Berhad Tell Us?

Things have been pretty stable at Seacera Group 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 Seacera Group 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, Seacera Group Berhad has done well to reduce current liabilities to 2.9% of total assets over the last five years. This can eliminate some of the risks inherent in the operations because the business has less outstanding obligations to their suppliers and or short-term creditors than they did previously.

In Conclusion...

We can conclude that in regards to Seacera Group Berhad's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 69% over the last five years, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

Seacera Group Berhad does have some risks though, and we've spotted 2 warning signs for Seacera Group Berhad that you might be interested in.

While Seacera Group Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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Find out whether Seacera Group Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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