We Like These Underlying Return On Capital Trends At QL Resources Berhad (KLSE:QL)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at QL Resources Berhad (KLSE:QL) so let's look a bit deeper.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the 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)

0.19 = RM690m ÷ (RM5.5b - RM1.8b) (Based on the trailing twelve months to March 2024).

So, QL Resources Berhad has an ROCE of 19%. On its own, that's a standard return, however it's much better than the 6.9% generated by the Food industry.

Check out 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 to see what analysts are forecasting going forward, you should check out our free analyst report for QL Resources Berhad .

How Are Returns Trending?

The trends we've noticed at QL Resources Berhad are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. Basically the business is earning more per dollar of capital invested and in addition to that, 35% more capital is being employed now too. So we're very much inspired by what we're seeing at QL Resources Berhad thanks to its ability to profitably reinvest capital.

What We Can Learn From QL Resources Berhad's ROCE

To sum it up, QL Resources Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 48% 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. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

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.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.

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