The Returns On Capital At Unisem (M) Berhad (KLSE:UNISEM) Don't Inspire Confidence

If you're looking for a multi-bagger, there's a few things to 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. In light of that, when we looked at Unisem (M) Berhad (KLSE:UNISEM) and its ROCE trend, we weren't exactly thrilled.

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Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Unisem (M) Berhad, this is the formula:

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

0.032 = RM77m ÷ (RM3.0b - RM564m) (Based on the trailing twelve months to March 2025).

So, Unisem (M) Berhad has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Semiconductor industry average of 7.0%.

Check out our latest analysis for Unisem (M) Berhad

In the above chart we have measured Unisem (M) 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 Unisem (M) Berhad .

The Trend Of ROCE

On the surface, the trend of ROCE at Unisem (M) Berhad doesn't inspire confidence. To be more specific, ROCE has fallen from 6.0% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Key Takeaway

While returns have fallen for Unisem (M) Berhad in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And long term investors must be optimistic going forward because the stock has returned a huge 115% to shareholders in the last five years. So while investors seem to be recognizing these promising trends, we would look further into this stock to make sure the other metrics justify the positive view.

On a final note, we found 2 warning signs for Unisem (M) Berhad (1 is concerning) you should be aware of.

While Unisem (M) 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.