Hextar Global Berhad (KLSE:HEXTAR) Is Investing Its Capital With Increasing Efficiency

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. And in light of that, the trends we're seeing at Hextar Global Berhad's (KLSE:HEXTAR) look very promising so lets take a look.

What is 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 Hextar Global Berhad is:

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

0.23 = RM53m ÷ (RM363m - RM133m) (Based on the trailing twelve months to June 2021).

So, Hextar Global Berhad has an ROCE of 23%. That's a fantastic return and not only that, it outpaces the average of 8.7% earned by companies in a similar industry.

View our latest analysis for Hextar Global Berhad

Above you can see how the current ROCE for Hextar Global Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free report on analyst forecasts for the company.

So How Is Hextar Global Berhad's ROCE Trending?

Hextar Global Berhad's ROCE growth is quite impressive. The figures show that over the last two years, ROCE has grown 77% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

In summary, we're delighted to see that Hextar Global Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 257% total return over the last year tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Hextar Global Berhad can keep these trends up, it could have a bright future ahead.

Hextar Global Berhad does have some risks though, and we've spotted 2 warning signs for Hextar Global Berhad that you might be interested in.

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high returns on equity.

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.

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