Malayan United Industries Berhad (KLSE:MUIIND) Might Have The Makings Of A Multi-Bagger

By
Simply Wall St
Published
August 16, 2021
KLSE:MUIIND
Source: Shutterstock

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Malayan United Industries Berhad (KLSE:MUIIND) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Malayan United Industries Berhad, this is the formula:

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

0.058 = RM69m ÷ (RM1.5b - RM270m) (Based on the trailing twelve months to March 2021).

Thus, Malayan United Industries Berhad has an ROCE of 5.8%. On its own that's a low return on capital but it's in line with the industry's average returns of 5.9%.

View our latest analysis for Malayan United Industries Berhad

roce
KLSE:MUIIND Return on Capital Employed August 17th 2021

Historical performance is a great place to start when researching a stock so above you can see the gauge for Malayan United Industries Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Malayan United Industries Berhad, check out these free graphs here.

What Does the ROCE Trend For Malayan United Industries Berhad Tell Us?

Like most people, we're pleased that Malayan United Industries Berhad is now generating some pretax earnings. The company was generating losses five years ago, but now it's turned around, earning 5.8% which is no doubt a relief for some early shareholders. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 33%. This could potentially mean that the company is selling some of its assets.

The Bottom Line

From what we've seen above, Malayan United Industries Berhad has managed to increase it's returns on capital all the while reducing it's capital base. Given the stock has declined 41% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

Malayan United Industries Berhad does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those makes us a bit uncomfortable...

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.

When trading stocks or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.