Jaycorp Berhad (KLSE:JAYCORP) Might Have The Makings Of A Multi-Bagger

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. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Jaycorp Berhad (KLSE:JAYCORP) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Jaycorp Berhad:

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

0.19 = RM42m ÷ (RM285m - RM68m) (Based on the trailing twelve months to January 2021).

Thus, Jaycorp Berhad has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 9.9% generated by the Consumer Durables industry.

See our latest analysis for Jaycorp Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Jaycorp Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Jaycorp Berhad Tell Us?

The trends we've noticed at Jaycorp Berhad are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 29%. So we're very much inspired by what we're seeing at Jaycorp Berhad thanks to its ability to profitably reinvest capital.

Our Take On Jaycorp Berhad's ROCE

All in all, it's terrific to see that Jaycorp Berhad is reaping the rewards from prior investments and is growing its capital base. And a remarkable 167% 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 Jaycorp Berhad can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for Jaycorp Berhad you'll probably want to know about.

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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