Slowing Rates Of Return At QL Resources Berhad (KLSE:QL) Leave Little Room For Excitement

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of QL Resources Berhad (KLSE:QL) looks decent, right now, so lets see what the trend of returns can tell us.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on QL Resources Berhad is:

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

0.14 = RM475m ÷ (RM5.4b - RM1.9b) (Based on the trailing twelve months to September 2022).

Thus, QL Resources Berhad has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 11% generated by the Food industry.

See 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're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

How Are Returns Trending?

While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 14% and the business has deployed 49% more capital into its operations. 14% is a pretty standard return, and it provides some comfort knowing that QL Resources Berhad has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

In Conclusion...

In the end, QL Resources Berhad has proven its ability to adequately reinvest capital at good rates of return. And the stock has followed suit returning a meaningful 83% to shareholders over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

QL Resources Berhad could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation on our platform quite valuable.

While QL Resources Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.