Returns On Capital At Yoong Onn Corporation Berhad (KLSE:YOCB) Have Hit The Brakes

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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, the ROCE of Yoong Onn Corporation Berhad (KLSE:YOCB) looks decent, right now, so lets see what the trend of returns can tell us.

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. Analysts use this formula to calculate it for Yoong Onn Corporation Berhad:

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

0.11 = RM28m ÷ (RM280m - RM24m) (Based on the trailing twelve months to March 2021).

So, Yoong Onn Corporation Berhad has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Retail Distributors industry average of 9.4%.

See our latest analysis for Yoong Onn Corporation Berhad

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

What Can We Tell From Yoong Onn Corporation Berhad's ROCE Trend?

The trend of ROCE doesn't stand out much, but returns on a whole are decent. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 38% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Yoong Onn Corporation Berhad has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

Our Take On Yoong Onn Corporation Berhad's ROCE

In the end, Yoong Onn Corporation Berhad has proven its ability to adequately reinvest capital at good rates of return. In light of this, the stock has only gained 23% over the last five years for shareholders who have owned the stock in this period. So because of the trends we're seeing, we'd recommend looking further into this stock to see if it has the makings of a multi-bagger.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for Yoong Onn Corporation Berhad (of which 1 shouldn't be ignored!) that you should know about.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and 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.
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