SKB Shutters Corporation Berhad's (KLSE:SKBSHUT) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So when we looked at SKB Shutters Corporation Berhad (KLSE:SKBSHUT) and its trend of ROCE, we really liked what we saw.

What Is 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. The formula for this calculation on SKB Shutters Corporation Berhad is:

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

0.12 = RM23m ÷ (RM248m - RM55m) (Based on the trailing twelve months to June 2024).

Thus, SKB Shutters Corporation Berhad has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 5.8% generated by the Building industry.

View 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 covering SKB Shutters Corporation Berhad's past earnings, revenue and cash flow.

The Trend Of ROCE

We like the trends that we're seeing from SKB Shutters Corporation Berhad. The data shows that returns on capital have increased substantially over the last five years to 12%. The amount of capital employed has increased too, by 54%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

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 SKB Shutters Corporation Berhad has. Since the stock has returned a staggering 344% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

One more thing to note, we've identified 3 warning signs with SKB Shutters Corporation Berhad and understanding these should be part of your investment process.

While SKB Shutters Corporation 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.