Returns Are Gaining Momentum At Meta Bright Group Berhad (KLSE:MBRIGHT)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Meta Bright Group Berhad (KLSE:MBRIGHT) and its trend of ROCE, we really liked what we saw.

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. The formula for this calculation on Meta Bright Group Berhad is:

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

0.014 = RM4.1m ÷ (RM346m - RM60m) (Based on the trailing twelve months to December 2023).

So, Meta Bright Group Berhad has an ROCE of 1.4%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 5.3%.

Check out our latest analysis for Meta Bright Group Berhad

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

How Are Returns Trending?

Meta Bright Group 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 1.4% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Meta Bright Group Berhad is utilizing 32% 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 Meta Bright Group Berhad's ROCE

In summary, it's great to see that Meta Bright Group Berhad has managed to break into profitability and is continuing to reinvest in its business. And with a respectable 68% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Meta Bright Group Berhad, you might be interested to know about the 3 warning signs that our analysis has discovered.

While Meta Bright Group Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.