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

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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 Malaysian Pacific Industries Berhad (KLSE:MPI) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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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. Analysts use this formula to calculate it for Malaysian Pacific Industries Berhad:

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

0.09 = RM239m ÷ (RM3.0b - RM359m) (Based on the trailing twelve months to March 2025).

Thus, Malaysian Pacific Industries Berhad has an ROCE of 9.0%. In absolute terms, that's a low return, but it's much better than the Semiconductor industry average of 7.0%.

Check out our latest analysis for Malaysian Pacific Industries Berhad

Above you can see how the current ROCE for Malaysian Pacific Industries Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Malaysian Pacific Industries Berhad .

What The Trend Of ROCE Can Tell Us

The returns on capital haven't changed much for Malaysian Pacific Industries Berhad in recent years. The company has employed 64% more capital in the last five years, and the returns on that capital have remained stable at 9.0%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Bottom Line On Malaysian Pacific Industries Berhad's ROCE

Long story short, while Malaysian Pacific Industries Berhad has been reinvesting its capital, the returns that it's generating haven't increased. Since the stock has gained an impressive 82% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

If you're still interested in Malaysian Pacific Industries Berhad it's worth checking out our FREE intrinsic value approximation for MPI to see if it's trading at an attractive price in other respects.

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.

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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.