Returns On Capital Are Showing Encouraging Signs At Mayu Global Group Berhad (KLSE:MAYU)

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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Mayu Global Group Berhad (KLSE:MAYU) so let's look a bit deeper.

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. The formula for this calculation on Mayu Global Group Berhad is:

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

0.051 = RM21m ÷ (RM450m - RM38m) (Based on the trailing twelve months to June 2023).

So, Mayu Global Group Berhad has an ROCE of 5.1%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 6.5%.

Check out our latest analysis for Mayu Global 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'd like to look at how Mayu Global Group Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

So How Is Mayu Global Group Berhad's ROCE Trending?

Mayu Global Group Berhad is showing promise given that its ROCE is trending up and to the right. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 392% over the last five years. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

What We Can Learn From Mayu Global Group Berhad's ROCE

In summary, we're delighted to see that Mayu Global Group Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 57% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we found 4 warning signs for Mayu Global Group Berhad (2 are a bit unpleasant) you should be aware of.

While Mayu Global Group Berhad 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.