Investors Will Want Mayu Global Group Berhad's (KLSE:MAYU) Growth In ROCE To Persist

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. 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 Mayu Global Group Berhad (KLSE:MAYU) and its trend of ROCE, we really liked what we saw.

Our free stock report includes 3 warning signs investors should be aware of before investing in Mayu Global Group Berhad. Read for free now.

Understanding 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. Analysts use this formula to calculate it for Mayu Global Group Berhad:

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

0.031 = RM14m ÷ (RM469m - RM31m) (Based on the trailing twelve months to December 2024).

Thus, Mayu Global Group Berhad has an ROCE of 3.1%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 5.4%.

See our latest analysis for Mayu Global Group Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mayu Global Group Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Mayu Global Group Berhad.

The Trend Of ROCE

We're delighted to see that Mayu Global Group Berhad is reaping rewards from its investments and has now broken into profitability. The company now earns 3.1% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

As discussed above, Mayu Global Group Berhad appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And since the stock has fallen 52% over the last three years, there might be an opportunity here. 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 Mayu Global Group Berhad (including 1 which is a bit 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.