Excel Force MSC Berhad (KLSE:EFORCE) Has Some Way To Go To Become A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. That's why when we briefly looked at Excel Force MSC Berhad's (KLSE:EFORCE) ROCE trend, we were pretty happy with what we saw.

Understanding 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. The formula for this calculation on Excel Force MSC Berhad is:

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

0.11 = RM11m ÷ (RM107m - RM7.8m) (Based on the trailing twelve months to June 2023).

Thus, Excel Force MSC Berhad has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Software industry average of 9.3%.

View our latest analysis for Excel Force MSC Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings, revenue and cash flow of Excel Force MSC Berhad, check out these free graphs here.

What Can We Tell From Excel Force MSC Berhad's ROCE Trend?

While the returns on capital are good, they haven't moved much. The company has consistently earned 11% for the last five years, and the capital employed within the business has risen 87% in that time. 11% is a pretty standard return, and it provides some comfort knowing that Excel Force MSC Berhad has consistently earned this amount. 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 Bottom Line On Excel Force MSC Berhad's ROCE

In the end, Excel Force MSC Berhad has proven its ability to adequately reinvest capital at good rates of return. Yet over the last five years the stock has declined 10%, so the decline might provide an opening. For that reason, savvy investors might want to look further into this company in case it's a prime investment.

On a separate note, we've found 2 warning signs for Excel Force MSC Berhad you'll probably want to know about.

While Excel Force MSC 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.