Lion Industries Corporation Berhad (KLSE:LIONIND) Is Doing The Right Things To Multiply Its Share Price

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Speaking of which, we noticed some great changes in Lion Industries Corporation Berhad's (KLSE:LIONIND) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What is it?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Lion Industries Corporation Berhad, this is the formula:

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

0.0022 = RM5.3m ÷ (RM3.5b - RM1.1b) (Based on the trailing twelve months to December 2021).

Thus, Lion Industries Corporation Berhad has an ROCE of 0.2%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 13%.

Check out our latest analysis for Lion Industries Corporation Berhad

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 want to delve into the historical earnings, revenue and cash flow of Lion Industries Corporation Berhad, check out these free graphs here.

So How Is Lion Industries Corporation Berhad's ROCE Trending?

The fact that Lion Industries Corporation Berhad is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 0.2% which is a sight for sore eyes. Not only that, but the company is utilizing 26% more capital than before, but that's to be expected from a company 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.

The Bottom Line

Overall, Lion Industries Corporation Berhad gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. Astute investors may have an opportunity here because the stock has declined 66% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

One final note, you should learn about the 3 warning signs we've spotted with Lion Industries Corporation Berhad (including 1 which is concerning) .

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.