Return Trends At Unique Fire Holdings Berhad (KLSE:UNIQUE) Aren't Appealing

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. That's why when we briefly looked at Unique Fire Holdings Berhad's (KLSE:UNIQUE) ROCE trend, we were pretty happy with what we saw.

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Return On Capital Employed (ROCE): What Is It?

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 Unique Fire Holdings Berhad:

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

0.15 = RM14m ÷ (RM106m - RM12m) (Based on the trailing twelve months to December 2024).

Therefore, Unique Fire Holdings Berhad has an ROCE of 15%. On its own, that's a standard return, however it's much better than the 6.0% generated by the Commercial Services industry.

Check out our latest analysis for Unique Fire Holdings Berhad

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

How Are Returns Trending?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. Over the past five years, ROCE has remained relatively flat at around 15% and the business has deployed 37% more capital into its operations. 15% is a pretty standard return, and it provides some comfort knowing that Unique Fire Holdings Berhad has consistently earned this amount. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Bottom Line

In the end, Unique Fire Holdings Berhad has proven its ability to adequately reinvest capital at good rates of return. And since the stock has risen strongly over the last year, it appears the market might expect this trend to continue. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

Like most companies, Unique Fire Holdings Berhad does come with some risks, and we've found 2 warning signs that you should be aware of.

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.