Wellcall Holdings Berhad (KLSE:WELLCAL) Is Reinvesting To Multiply In Value

What trends should we look for it we want to identify stocks that can multiply in value over the long term? 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. So, when we ran our eye over Wellcall Holdings Berhad's (KLSE:WELLCAL) trend of ROCE, we really liked what we saw.

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

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

0.40 = RM59m ÷ (RM175m - RM25m) (Based on the trailing twelve months to December 2024).

Therefore, Wellcall Holdings Berhad has an ROCE of 40%. In absolute terms that's a great return and it's even better than the Machinery industry average of 8.2%.

View our latest analysis for Wellcall Holdings Berhad

In the above chart we have measured Wellcall Holdings 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 Wellcall Holdings Berhad for free.

So How Is Wellcall Holdings Berhad's ROCE Trending?

It's hard not to be impressed by Wellcall Holdings Berhad's returns on capital. Over the past five years, ROCE has remained relatively flat at around 40% and the business has deployed 22% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If Wellcall Holdings Berhad can keep this up, we'd be very optimistic about its future.

The Bottom Line On Wellcall Holdings Berhad's ROCE

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. And the stock has done incredibly well with a 120% return over the last five years, so long term investors are no doubt ecstatic with that result. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

If you want to continue researching Wellcall Holdings Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.

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. 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.