Returns On Capital Are A Standout For Carlo Rino Group Berhad (KLSE:CRG)

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at the ROCE trend of Carlo Rino Group Berhad (KLSE:CRG) we really liked what we saw.

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

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 Carlo Rino Group Berhad is:

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

0.30 = RM36m ÷ (RM142m - RM21m) (Based on the trailing twelve months to December 2022).

So, Carlo Rino Group Berhad has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 19%.

Check out our latest analysis for Carlo Rino Group Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Carlo Rino Group Berhad's ROCE against it's prior returns. If you'd like to look at how Carlo Rino Group Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Carlo Rino Group Berhad Tell Us?

We like the trends that we're seeing from Carlo Rino Group Berhad. Over the last five years, returns on capital employed have risen substantially to 30%. The amount of capital employed has increased too, by 40%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

What We Can Learn From Carlo Rino Group Berhad's ROCE

All in all, it's terrific to see that Carlo Rino Group Berhad is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last three years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

One final note, you should learn about the 3 warning signs we've spotted with Carlo Rino Group Berhad (including 1 which is a bit unpleasant) .

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning 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.