Return Trends At Carimin Petroleum Berhad (KLSE:CARIMIN) Aren't Appealing

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. However, after investigating Carimin Petroleum Berhad (KLSE:CARIMIN), we don't think it's current trends fit the mold of a multi-bagger.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Carimin Petroleum Berhad is:

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

0.10 = RM24m ÷ (RM349m - RM122m) (Based on the trailing twelve months to March 2024).

Thus, Carimin Petroleum 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 Carimin Petroleum 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 , check out these free graphs detailing revenue and cash flow performance of Carimin Petroleum Berhad.

What The Trend Of ROCE Can Tell Us

Things have been pretty stable at Carimin Petroleum Berhad, with its capital employed and returns on that capital staying somewhat the same for the last five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. With that in mind, unless investment picks up again in the future, we wouldn't expect Carimin Petroleum Berhad to be a multi-bagger going forward.

The Bottom Line On Carimin Petroleum Berhad's ROCE

We can conclude that in regards to Carimin Petroleum Berhad's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 23% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

Like most companies, Carimin Petroleum Berhad does come with some risks, and we've found 2 warning signs that you should be aware of.

While Carimin Petroleum 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.