Returns At Malaysian Pacific Industries Berhad (KLSE:MPI) Appear To Be Weighed Down

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. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. With that in mind, the ROCE of Malaysian Pacific Industries Berhad (KLSE:MPI) looks decent, right now, so lets see what the trend of returns can tell us.

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. To calculate this metric for Malaysian Pacific Industries Berhad, this is the formula:

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

0.17 = RM414m ÷ (RM3.1b - RM712m) (Based on the trailing twelve months to December 2021).

So, Malaysian Pacific Industries Berhad has an ROCE of 17%. That's a relatively normal return on capital, and it's around the 16% generated by the Semiconductor industry.

Check out our latest analysis for Malaysian Pacific Industries Berhad

In the above chart we have measured Malaysian Pacific Industries Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Malaysian Pacific Industries Berhad here for free.

So How Is Malaysian Pacific Industries Berhad's ROCE Trending?

While the current returns on capital are decent, they haven't changed much. Over the past five years, ROCE has remained relatively flat at around 17% and the business has deployed 86% more capital into its operations. Since 17% is a moderate ROCE though, it's good to see a business can continue to reinvest at these decent rates of return. Over long periods of time, returns like these might not be too exciting, but with consistency they can pay off in terms of share price returns.

The Key Takeaway

To sum it up, Malaysian Pacific Industries Berhad has simply been reinvesting capital steadily, at those decent rates of return. And the stock has done incredibly well with a 170% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

Like most companies, Malaysian Pacific Industries Berhad does come with some risks, and we've found 1 warning sign that you should be aware of.

While Malaysian Pacific Industries Berhad isn't earning the highest return, check out this free list of companies that are 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.