The Trends At Visdynamics Holdings Berhad (KLSE:VIS) That You Should Know About

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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating Visdynamics Holdings Berhad (KLSE:VIS), we don't think it's current trends fit the mold of a multi-bagger.

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 Visdynamics Holdings Berhad:

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

0.051 = RM2.1m ÷ (RM50m - RM8.3m) (Based on the trailing twelve months to July 2020).

Therefore, Visdynamics Holdings Berhad has an ROCE of 5.1%. Ultimately, that's a low return and it under-performs the Semiconductor industry average of 12%.

View our latest analysis for Visdynamics Holdings Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Visdynamics Holdings Berhad's ROCE against it's prior returns. If you'd like to look at how Visdynamics Holdings Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Visdynamics Holdings Berhad Tell Us?

The returns on capital haven't changed much for Visdynamics Holdings Berhad in recent years. The company has consistently earned 5.1% for the last five years, and the capital employed within the business has risen 103% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.

Our Take On Visdynamics Holdings Berhad's ROCE

In summary, Visdynamics Holdings Berhad has simply been reinvesting capital and generating the same low rate of return as before. Yet to long term shareholders the stock has gifted them an incredible 384% return in the last five years, so the market appears to be rosy about its future. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

Like most companies, Visdynamics Holdings Berhad does come with some risks, and we've found 3 warning signs that you should be aware of.

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. 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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