Returns At CYL Corporation Berhad (KLSE:CYL) Are On The Way Up

There are a few key trends to look for if we want to identify the next multi-bagger. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in CYL Corporation Berhad's (KLSE:CYL) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

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. To calculate this metric for CYL Corporation Berhad, this is the formula:

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

0.13 = RM8.7m ÷ (RM75m - RM5.9m) (Based on the trailing twelve months to July 2023).

So, CYL Corporation Berhad has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 10% generated by the Packaging industry.

See our latest analysis for CYL Corporation Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for CYL Corporation Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of CYL Corporation Berhad, check out these free graphs here.

How Are Returns Trending?

We're delighted to see that CYL Corporation Berhad is reaping rewards from its investments and has now broken into profitability. The company now earns 13% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

What We Can Learn From CYL Corporation Berhad's ROCE

As discussed above, CYL Corporation Berhad appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Considering the stock has delivered 2.9% 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 CYL Corporation Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.

While CYL Corporation 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.

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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.