SKB Shutters Corporation Berhad (KLSE:SKBSHUT) Might Have The Makings Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, we've noticed some promising trends at SKB Shutters Corporation Berhad (KLSE:SKBSHUT) so let's look a bit deeper.

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. To calculate this metric for SKB Shutters Corporation Berhad, this is the formula:

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

0.13 = RM19m ÷ (RM189m - RM43m) (Based on the trailing twelve months to December 2022).

Thus, SKB Shutters Corporation Berhad has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 7.1% generated by the Building industry.

Check out our latest analysis for SKB Shutters Corporation Berhad

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

The Trend Of ROCE

SKB Shutters Corporation Berhad's ROCE growth is quite impressive. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 132% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On SKB Shutters Corporation Berhad's ROCE

To sum it up, SKB Shutters Corporation Berhad is collecting higher returns from the same amount of capital, and that's impressive. Since the stock has returned a solid 84% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if SKB Shutters Corporation Berhad can keep these trends up, it could have a bright future ahead.

SKB Shutters Corporation Berhad does have some risks though, and we've spotted 1 warning sign for SKB Shutters Corporation Berhad that you might be interested in.

While SKB Shutters Corporation 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.