These Trends Paint A Bright Future For UWC Berhad (KLSE:UWC)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in UWC Berhad's (KLSE:UWC) returns on capital, so let's have a look.

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

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

0.35 = RM87m ÷ (RM292m - RM44m) (Based on the trailing twelve months to October 2020).

So, UWC Berhad has an ROCE of 35%. That's a fantastic return and not only that, it outpaces the average of 10% earned by companies in a similar industry.

See our latest analysis for UWC Berhad

In the above chart we have measured UWC Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering UWC Berhad here for free.

How Are Returns Trending?

The trends we've noticed at UWC Berhad are quite reassuring. The numbers show that in the last four years, the returns generated on capital employed have grown considerably to 35%. The amount of capital employed has increased too, by 174%. So we're very much inspired by what we're seeing at UWC Berhad thanks to its ability to profitably reinvest capital.

Our Take On UWC Berhad's ROCE

All in all, it's terrific to see that UWC Berhad is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 378% to shareholders over the last year, 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, we've spotted 1 warning sign facing UWC Berhad that you might find interesting.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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This article by Simply Wall St is general in nature. 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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