We Like These Underlying Return On Capital Trends At Meta Bright Group Berhad (KLSE:MBRIGHT)

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Meta Bright Group Berhad (KLSE:MBRIGHT) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Meta Bright Group Berhad, this is the formula:

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

0.015 = RM5.5m ÷ (RM486m - RM125m) (Based on the trailing twelve months to March 2024).

So, Meta Bright Group Berhad has an ROCE of 1.5%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 5.1%.

See 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.

What Can We Tell From Meta Bright Group Berhad's ROCE Trend?

We're delighted to see that Meta Bright Group Berhad is reaping rewards from its investments and is now generating some pre-tax profits. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.5% on its capital. And unsurprisingly, like most companies trying to break into the black, Meta Bright Group Berhad is utilizing 70% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Meta Bright Group Berhad's ROCE

To the delight of most shareholders, Meta Bright Group Berhad has now broken into profitability. And with a respectable 48% 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. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching Meta Bright Group Berhad, you might be interested to know about the 4 warning signs that our analysis has discovered.

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.

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