Returns Are Gaining Momentum At CAB Cakaran Corporation Berhad (KLSE:CAB)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, CAB Cakaran Corporation Berhad (KLSE:CAB) looks quite promising in regards to its trends of return on capital.

What Is 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. Analysts use this formula to calculate it for CAB Cakaran Corporation Berhad:

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

0.17 = RM188m ÷ (RM1.6b - RM515m) (Based on the trailing twelve months to March 2024).

Thus, CAB Cakaran Corporation Berhad has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 7.4% it's much better.

Check out our latest analysis for CAB Cakaran Corporation Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for CAB Cakaran Corporation Berhad's ROCE against it's prior returns. If you'd like to look at how CAB Cakaran Corporation Berhad has performed in the past in other metrics, you can view this free graph of CAB Cakaran Corporation Berhad's past earnings, revenue and cash flow.

What Can We Tell From CAB Cakaran Corporation Berhad's ROCE Trend?

Investors would be pleased with what's happening at CAB Cakaran Corporation Berhad. Over the last five years, returns on capital employed have risen substantially to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 21% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

To sum it up, CAB Cakaran Corporation Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Considering the stock has delivered 30% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

If you want to continue researching CAB Cakaran Corporation Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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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