Apollo Food Holdings Berhad's (KLSE:APOLLO) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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, Apollo Food Holdings Berhad (KLSE:APOLLO) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

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 Apollo Food Holdings Berhad is:

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

0.16 = RM40m ÷ (RM269m - RM14m) (Based on the trailing twelve months to July 2023).

So, Apollo Food Holdings Berhad has an ROCE of 16%. On its own, that's a standard return, however it's much better than the 6.8% generated by the Food industry.

View our latest analysis for Apollo Food Holdings Berhad

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

What Can We Tell From Apollo Food Holdings Berhad's ROCE Trend?

Apollo Food Holdings Berhad's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 170% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

In Conclusion...

In summary, we're delighted to see that Apollo Food Holdings Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And with a respectable 61% 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. In light of that, we think it's worth looking further into this stock because if Apollo Food Holdings Berhad can keep these trends up, it could have a bright future ahead.

If you'd like to know about the risks facing Apollo Food Holdings Berhad, we've discovered 1 warning sign that you should be aware of.

While Apollo Food Holdings 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.