Return Trends At Karyon Industries Berhad (KLSE:KARYON) Aren't Appealing

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Karyon Industries Berhad (KLSE:KARYON) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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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. Analysts use this formula to calculate it for Karyon Industries Berhad:

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

0.093 = RM13m ÷ (RM156m - RM19m) (Based on the trailing twelve months to December 2024).

Therefore, Karyon Industries Berhad has an ROCE of 9.3%. In absolute terms, that's a low return, but it's much better than the Chemicals industry average of 7.7%.

Check out our latest analysis for Karyon Industries Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Karyon Industries Berhad's ROCE against it's prior returns. If you'd like to look at how Karyon Industries Berhad has performed in the past in other metrics, you can view this free graph of Karyon Industries Berhad's past earnings, revenue and cash flow .

How Are Returns Trending?

In terms of Karyon Industries Berhad's historical ROCE trend, it doesn't exactly demand attention. The company has employed 21% more capital in the last five years, and the returns on that capital have remained stable at 9.3%. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

In Conclusion...

In conclusion, Karyon Industries Berhad has been investing more capital into the business, but returns on that capital haven't increased. Unsurprisingly, the stock has only gained 15% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

If you want to continue researching Karyon Industries Berhad, you might be interested to know about the 2 warning signs that our analysis has discovered.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.