Investors Will Want QL Resources Berhad's (KLSE:QL) Growth In ROCE To Persist

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at QL Resources Berhad (KLSE:QL) so let's look a bit deeper.

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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. Analysts use this formula to calculate it for QL Resources Berhad:

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

0.17 = RM722m ÷ (RM6.0b - RM1.9b) (Based on the trailing twelve months to December 2024).

So, QL Resources Berhad has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 9.4% generated by the Food industry.

View our latest analysis for QL Resources Berhad

In the above chart we have measured QL Resources Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering QL Resources Berhad for free.

How Are Returns Trending?

Investors would be pleased with what's happening at QL Resources Berhad. The data shows that returns on capital have increased substantially over the last five years to 17%. The amount of capital employed has increased too, by 44%. So we're very much inspired by what we're seeing at QL Resources Berhad thanks to its ability to profitably reinvest capital.

The Bottom Line

All in all, it's terrific to see that QL Resources Berhad is reaping the rewards from prior investments and is growing its capital base. Considering the stock has delivered 40% 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. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

While QL Resources Berhad looks impressive, no company is worth an infinite price. The intrinsic value infographic for QL helps visualize whether it is currently trading for a fair price.

While QL Resources 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.