Returns At Prolexus Berhad (KLSE:PRLEXUS) Appear To Be Weighed Down

If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at Prolexus Berhad's (KLSE:PRLEXUS) ROCE trend, we were pretty happy with what we saw.

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

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. Analysts use this formula to calculate it for Prolexus Berhad:

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

0.10 = RM39m ÷ (RM429m - RM56m) (Based on the trailing twelve months to April 2023).

Therefore, Prolexus Berhad has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 10%.

See our latest analysis for Prolexus 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 want to delve into the historical earnings, revenue and cash flow of Prolexus Berhad, check out these free graphs here.

The Trend Of ROCE

While the current returns on capital are decent, they haven't changed much. The company has consistently earned 10% for the last five years, and the capital employed within the business has risen 37% in that time. Since 10% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. 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.

What We Can Learn From Prolexus Berhad's ROCE

In the end, Prolexus Berhad has proven its ability to adequately reinvest capital at good rates of return. Yet over the last five years the stock has declined 21%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

One more thing to note, we've identified 1 warning sign with Prolexus Berhad and understanding this should be part of your investment process.

While Prolexus 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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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.