Sycal Ventures Berhad (KLSE:SYCAL) Has Some Way To Go To Become A Multi-Bagger

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. In light of that, when we looked at Sycal Ventures Berhad (KLSE:SYCAL) and its ROCE trend, we weren't exactly thrilled.

Return On Capital Employed (ROCE): What Is It?

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 Sycal Ventures Berhad:

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

0.03 = RM9.4m ÷ (RM448m - RM139m) (Based on the trailing twelve months to March 2024).

So, Sycal Ventures Berhad has an ROCE of 3.0%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 7.7%.

Check out our latest analysis for Sycal Ventures Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Sycal Ventures Berhad has performed in the past in other metrics, you can view this free graph of Sycal Ventures Berhad's past earnings, revenue and cash flow.

How Are Returns Trending?

Over the past five years, Sycal Ventures Berhad's ROCE and capital employed have both remained mostly flat. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So unless we see a substantial change at Sycal Ventures Berhad in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

The Key Takeaway

We can conclude that in regards to Sycal Ventures Berhad's returns on capital employed and the trends, there isn't much change to report on. Since the stock has declined 15% over the last five years, investors may not be too optimistic on this trend improving either. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you want to know some of the risks facing Sycal Ventures Berhad we've found 3 warning signs (1 is a bit concerning!) that you should be aware of before investing here.

While Sycal Ventures 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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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.

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