Shareholders Would Enjoy A Repeat Of CRG Berhad's (KLSE:CRG) Recent Growth In Returns

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of CRG Berhad (KLSE:CRG) looks great, so lets see what the trend can tell us.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for CRG Berhad:

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

0.24 = RM28m ÷ (RM136m - RM20m) (Based on the trailing twelve months to June 2022).

Thus, CRG Berhad has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

Check out our latest analysis for CRG Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for CRG Berhad's ROCE against it's prior returns. If you're interested in investigating CRG Berhad's past further, check out this free graph of past earnings, revenue and cash flow.

So How Is CRG Berhad's ROCE Trending?

CRG Berhad is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 24%. 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 37%. So we're very much inspired by what we're seeing at CRG Berhad thanks to its ability to profitably reinvest capital.

Our Take On CRG Berhad's ROCE

In summary, it's great to see that CRG Berhad can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last three 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.

On a final note, we found 3 warning signs for CRG Berhad (1 is a bit concerning) you should be aware of.

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.