Capital Investments At Mr D.I.Y. Group (M) Berhad (KLSE:MRDIY) Point To A Promising Future

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. That's why when we briefly looked at Mr D.I.Y. Group (M) Berhad's (KLSE:MRDIY) ROCE trend, we were very happy with what we saw.

What Is 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. The formula for this calculation on Mr D.I.Y. Group (M) Berhad is:

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

0.27 = RM847m ÷ (RM3.7b - RM636m) (Based on the trailing twelve months to September 2024).

Therefore, Mr D.I.Y. Group (M) Berhad has an ROCE of 27%. In absolute terms that's a great return and it's even better than the Specialty Retail industry average of 9.3%.

See our latest analysis for Mr D.I.Y. Group (M) Berhad

Above you can see how the current ROCE for Mr D.I.Y. Group (M) Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Mr D.I.Y. Group (M) Berhad .

How Are Returns Trending?

We'd be pretty happy with returns on capital like Mr D.I.Y. Group (M) Berhad. The company has consistently earned 27% for the last five years, and the capital employed within the business has risen 112% in that time. Returns like this are the envy of most businesses and given it has repeatedly reinvested at these rates, that's even better. If Mr D.I.Y. Group (M) Berhad can keep this up, we'd be very optimistic about its future.

The Bottom Line

In the end, the company has proven it can reinvest it's capital at high rates of returns, which you'll remember is a trait of a multi-bagger. Yet over the last three years the stock has declined 37%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

If you'd like to know about the risks facing Mr D.I.Y. Group (M) Berhad, we've discovered 1 warning sign that you should be aware of.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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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.