Investors Will Want Malayan Cement Berhad's (KLSE:MCEMENT) Growth In ROCE To Persist

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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 Malayan Cement Berhad (KLSE:MCEMENT) so let's look a bit deeper.

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Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Malayan Cement Berhad:

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

0.12 = RM1.1b ÷ (RM11b - RM1.3b) (Based on the trailing twelve months to June 2025).

So, Malayan Cement Berhad has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 7.1% generated by the Basic Materials industry.

Check out our latest analysis for Malayan Cement Berhad

In the above chart we have measured Malayan Cement Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Malayan Cement Berhad .

What Does the ROCE Trend For Malayan Cement Berhad Tell Us?

The fact that Malayan Cement Berhad is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 12% on its capital. Not only that, but the company is utilizing 243% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

One more thing to note, Malayan Cement Berhad has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

In Conclusion...

Long story short, we're delighted to see that Malayan Cement Berhad's reinvestment activities have paid off and the company is now profitable. Since the stock has returned a staggering 296% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for MCEMENT on our platform that is definitely worth checking out.

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.