Under The Bonnet, Carlo Rino Group Berhad's (KLSE:CRG) Returns Look Impressive

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing 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. Speaking of which, we noticed some great changes in Carlo Rino Group Berhad's (KLSE:CRG) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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 Carlo Rino Group Berhad:

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

0.20 = RM27m ÷ (RM150m - RM14m) (Based on the trailing twelve months to June 2024).

So, Carlo Rino Group Berhad has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 9.3%.

View our latest analysis for Carlo Rino 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Carlo Rino Group Berhad.

How Are Returns Trending?

Investors would be pleased with what's happening at Carlo Rino Group Berhad. Over the last five years, returns on capital employed have risen substantially to 20%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 54%. 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.

The Bottom Line On 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 five years, these patterns are being accounted for by investors. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you'd like to know more about Carlo Rino Group Berhad, we've spotted 2 warning signs, and 1 of them makes us a bit uncomfortable.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.