Master-Pack Group Berhad (KLSE:MASTER) Is Looking To Continue Growing Its Returns On Capital

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Master-Pack Group Berhad (KLSE:MASTER) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Master-Pack Group Berhad is:

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

0.11 = RM13m ÷ (RM142m - RM22m) (Based on the trailing twelve months to December 2020).

So, Master-Pack Group Berhad has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Packaging industry average of 10%.

See our latest analysis for Master-Pack Group 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're interested in investigating Master-Pack Group Berhad's past further, check out this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Master-Pack Group Berhad Tell Us?

We like the trends that we're seeing from Master-Pack Group Berhad. Over the last five years, returns on capital employed have risen substantially to 11%. Basically the business is earning more per dollar of capital invested and in addition to that, 59% more capital is being employed now too. So we're very much inspired by what we're seeing at Master-Pack Group Berhad thanks to its ability to profitably reinvest capital.

What We Can Learn From Master-Pack Group Berhad's ROCE

In summary, it's great to see that Master-Pack Group Berhad can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 244% total return over the last five years 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 Master-Pack Group Berhad can keep these trends up, it could have a bright future ahead.

If you want to continue researching Master-Pack Group Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.

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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