Returns On Capital Are Showing Encouraging Signs At MClean Technologies Berhad (KLSE:MCLEAN)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Speaking of which, we noticed some great changes in MClean Technologies Berhad's (KLSE:MCLEAN) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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 MClean Technologies Berhad, this is the formula:

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

0.15 = RM8.6m ÷ (RM76m - RM18m) (Based on the trailing twelve months to September 2025).

So, MClean Technologies Berhad has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 8.4% generated by the Commercial Services industry.

View our latest analysis for MClean Technologies Berhad

Above you can see how the current ROCE for MClean Technologies Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for MClean Technologies Berhad .

So How Is MClean Technologies Berhad's ROCE Trending?

The fact that MClean Technologies Berhad is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 15% on its capital. In addition to that, MClean Technologies Berhad is employing 44% 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...

Long story short, we're delighted to see that MClean Technologies Berhad's reinvestment activities have paid off and the company is now profitable. And a remarkable 105% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if MClean Technologies Berhad can keep these trends up, it could have a bright future ahead.

On a final note, we found 4 warning signs for MClean Technologies Berhad (2 shouldn't be ignored) you should be aware of.

While MClean Technologies Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.