Returns At IFCA MSC Berhad (KLSE:IFCAMSC) Are On The Way Up

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at IFCA MSC Berhad (KLSE:IFCAMSC) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for IFCA MSC Berhad:

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

0.18 = RM23m ÷ (RM165m - RM37m) (Based on the trailing twelve months to December 2024).

So, IFCA MSC Berhad has an ROCE of 18%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Software industry average of 16%.

See our latest analysis for IFCA MSC Berhad

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

So How Is IFCA MSC Berhad's ROCE Trending?

IFCA MSC Berhad has not disappointed with their ROCE growth. The figures show that over the last five years, ROCE has grown 483% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.

The Bottom Line On IFCA MSC Berhad's ROCE

As discussed above, IFCA MSC Berhad appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with a respectable 71% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. In light of that, we think it's worth looking further into this stock because if IFCA MSC Berhad can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 3 warning signs with IFCA MSC Berhad and understanding them should be part of your investment process.

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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.