Return Trends At Brite-Tech Berhad (KLSE:BTECH) Aren't Appealing

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Brite-Tech Berhad (KLSE:BTECH), we don't think it's current trends fit the mold of a multi-bagger.

Understanding 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. Analysts use this formula to calculate it for Brite-Tech Berhad:

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

0.08 = RM11m ÷ (RM138m - RM5.6m) (Based on the trailing twelve months to March 2023).

Therefore, Brite-Tech Berhad has an ROCE of 8.0%. Even though it's in line with the industry average of 7.8%, it's still a low return by itself.

Check out our latest analysis for Brite-Tech Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Brite-Tech Berhad's ROCE against it's prior returns. If you'd like to look at how Brite-Tech Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

There are better returns on capital out there than what we're seeing at Brite-Tech Berhad. Over the past five years, ROCE has remained relatively flat at around 8.0% and the business has deployed 100% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

What We Can Learn From Brite-Tech Berhad's ROCE

Long story short, while Brite-Tech Berhad has been reinvesting its capital, the returns that it's generating haven't increased. And investors may be recognizing these trends since the stock has only returned a total of 21% to shareholders over the last five years. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Brite-Tech Berhad does have some risks though, and we've spotted 3 warning signs for Brite-Tech Berhad that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.