Stock Analysis

Returns At Artroniq Berhad (KLSE:ARTRONIQ) Are On The Way Up

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KLSE:ARTRONIQ
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If you're looking for a multi-bagger, there's a few things to keep an eye out 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. So on that note, Artroniq Berhad (KLSE:ARTRONIQ) 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. Analysts use this formula to calculate it for Artroniq Berhad:

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

0.036 = RM1.8m ÷ (RM61m - RM12m) (Based on the trailing twelve months to June 2022).

Therefore, Artroniq Berhad has an ROCE of 3.6%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 8.3%.

Check out the opportunities and risks within the MY Chemicals industry.

roce
KLSE:ARTRONIQ Return on Capital Employed November 12th 2022

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

What Does the ROCE Trend For Artroniq Berhad Tell Us?

The fact that Artroniq Berhad is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 3.6% on its capital. In addition to that, Artroniq Berhad is employing 46% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

Our Take On Artroniq Berhad's ROCE

To the delight of most shareholders, Artroniq Berhad has now broken into profitability. Since the stock has returned a staggering 131% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Artroniq Berhad does have some risks though, and we've spotted 3 warning signs for Artroniq Berhad that you might be interested in.

While Artroniq 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.

Valuation is complex, but we're helping make it simple.

Find out whether Artroniq Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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