KYM Holdings Bhd (KLSE:KYM) Is Doing The Right Things To Multiply Its Share Price

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, KYM Holdings Bhd (KLSE:KYM) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for KYM Holdings Bhd, this is the formula:

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

0.0094 = RM1.2m ÷ (RM165m - RM33m) (Based on the trailing twelve months to April 2024).

Therefore, KYM Holdings Bhd has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 8.4%.

Check out our latest analysis for KYM Holdings Bhd

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating KYM Holdings Bhd's past further, check out this free graph covering KYM Holdings Bhd's past earnings, revenue and cash flow.

What Does the ROCE Trend For KYM Holdings Bhd Tell Us?

Shareholders will be relieved that KYM Holdings Bhd has broken into profitability. The company now earns 0.9% 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. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

The Bottom Line On KYM Holdings Bhd's ROCE

As discussed above, KYM Holdings Bhd 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 24% 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 KYM Holdings Bhd, you might be interested to know about the 3 warning signs that our analysis has discovered.

While KYM Holdings Bhd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.