Be Wary Of Inari Amertron Berhad (KLSE:INARI) And Its Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. However, after briefly looking over the numbers, we don't think Inari Amertron Berhad (KLSE:INARI) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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Return On Capital Employed (ROCE): What Is It?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Inari Amertron Berhad, this is the formula:

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

0.06 = RM191m ÷ (RM3.4b - RM226m) (Based on the trailing twelve months to March 2025).

Therefore, Inari Amertron Berhad has an ROCE of 6.0%. On its own, that's a low figure but it's around the 7.0% average generated by the Semiconductor industry.

Check out our latest analysis for Inari Amertron Berhad

In the above chart we have measured Inari Amertron Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Inari Amertron Berhad .

The Trend Of ROCE

On the surface, the trend of ROCE at Inari Amertron Berhad doesn't inspire confidence. To be more specific, ROCE has fallen from 15% over the last five years. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line On Inari Amertron Berhad's ROCE

To conclude, we've found that Inari Amertron Berhad is reinvesting in the business, but returns have been falling. Unsurprisingly, the stock has only gained 29% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

On a final note, we found 2 warning signs for Inari Amertron Berhad (1 doesn't sit too well with us) you should be aware of.

While Inari Amertron Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.