The Return Trends At Nextgreen Global Berhad (KLSE:NGGB) Look Promising

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Nextgreen Global Berhad (KLSE:NGGB) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Nextgreen Global Berhad is:

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

0.014 = RM3.1m ÷ (RM252m - RM27m) (Based on the trailing twelve months to September 2021).

Therefore, Nextgreen Global Berhad has an ROCE of 1.4%. In absolute terms, that's a low return and it also under-performs the Commercial Services industry average of 8.6%.

See our latest analysis for Nextgreen Global Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Nextgreen Global Berhad's ROCE against it's prior returns. If you're interested in investigating Nextgreen Global Berhad's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is Nextgreen Global Berhad's ROCE Trending?

We're delighted to see that Nextgreen Global Berhad is reaping rewards from its investments and is now generating some pre-tax profits. About five years ago the company was generating losses but things have turned around because it's now earning 1.4% on its capital. Not only that, but the company is utilizing 90% more capital than before, but that's to be expected from a company trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

In Conclusion...

Long story short, we're delighted to see that Nextgreen Global Berhad's reinvestment activities have paid off and the company is now profitable. And a remarkable 122% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

Nextgreen Global Berhad does have some risks though, and we've spotted 1 warning sign for Nextgreen Global Berhad that you might be interested in.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.