Will the Promising Trends At Iconic Worldwide Berhad (KLSE:ICONIC) Continue?

There are a few key trends to look for if we want to identify the next multi-bagger. 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. With that in mind, we've noticed some promising trends at Iconic Worldwide Berhad (KLSE:ICONIC) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Iconic Worldwide Berhad:

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

0.031 = RM5.4m ÷ (RM192m - RM17m) (Based on the trailing twelve months to December 2020).

Thus, Iconic Worldwide Berhad has an ROCE of 3.1%. Even though it's in line with the industry average of 3.3%, it's still a low return by itself.

Check out our latest analysis for Iconic Worldwide 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 Iconic Worldwide Berhad, check out these free graphs here.

So How Is Iconic Worldwide Berhad's ROCE Trending?

Iconic Worldwide Berhad has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 3.1% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Iconic Worldwide Berhad is utilizing 90% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

The Bottom Line On Iconic Worldwide Berhad's ROCE

Overall, Iconic Worldwide Berhad gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And a remarkable 296% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One more thing, we've spotted 2 warning signs facing Iconic Worldwide Berhad that you might find interesting.

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. 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.
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