Returns At JAG Berhad (KLSE:JAG) Are On The Way Up

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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 JAG Berhad's (KLSE:JAG) returns on capital, so let's have a look.

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. The formula for this calculation on JAG Berhad is:

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

0.093 = RM19m ÷ (RM228m - RM19m) (Based on the trailing twelve months to March 2021).

Thus, JAG Berhad has an ROCE of 9.3%. In absolute terms, that's a low return, but it's much better than the Commercial Services industry average of 4.5%.

View our latest analysis for JAG Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for JAG Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of JAG Berhad, check out these free graphs here.

So How Is JAG Berhad's ROCE Trending?

JAG Berhad has recently broken into profitability so their prior investments seem to be paying off. About five years ago the company was generating losses but things have turned around because it's now earning 9.3% on its capital. In addition to that, JAG Berhad is employing 56% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In Conclusion...

Overall, JAG Berhad gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Considering the stock has delivered 19% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

If you want to continue researching JAG Berhad, you might be interested to know about the 3 warning signs that our analysis has discovered.

While JAG 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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