Toyo Ventures Holdings Berhad (KLSE:TOYOVEN) Might Have The Makings Of A Multi-Bagger

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Toyo Ventures Holdings Berhad (KLSE:TOYOVEN) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for Toyo Ventures Holdings Berhad, this is the formula:

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

0.0079 = RM4.4m ÷ (RM581m - RM25m) (Based on the trailing twelve months to March 2024).

So, Toyo Ventures Holdings Berhad has an ROCE of 0.8%. In absolute terms, that's a low return and it also under-performs the Chemicals industry average of 6.8%.

Check out our latest analysis for Toyo Ventures Holdings 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 Toyo Ventures Holdings Berhad's past further, check out this free graph covering Toyo Ventures Holdings Berhad's past earnings, revenue and cash flow.

What Can We Tell From Toyo Ventures Holdings Berhad's ROCE Trend?

Toyo Ventures Holdings Berhad has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 0.8% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Toyo Ventures Holdings Berhad is utilizing 36% more capital than it was five years ago. 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.

What We Can Learn From Toyo Ventures Holdings Berhad's ROCE

To the delight of most shareholders, Toyo Ventures Holdings Berhad has now broken into profitability. Considering the stock has delivered 33% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 5 warning signs for Toyo Ventures Holdings Berhad (of which 2 are concerning!) that you should know about.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.