NCT Alliance Berhad (KLSE:NCT) Is Experiencing Growth In Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding 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 NCT Alliance Berhad (KLSE:NCT) and its trend of ROCE, we really liked what we saw.

Return On Capital Employed (ROCE): What is it?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on NCT Alliance Berhad is:

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

0.11 = RM74m ÷ (RM788m - RM131m) (Based on the trailing twelve months to March 2022).

Thus, NCT Alliance Berhad has an ROCE of 11%. By itself that's a normal return on capital and it's in line with the industry's average returns of 11%.

View our latest analysis for NCT Alliance Berhad

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

So How Is NCT Alliance Berhad's ROCE Trending?

The trends we've noticed at NCT Alliance Berhad are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 11%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 309%. So we're very much inspired by what we're seeing at NCT Alliance Berhad thanks to its ability to profitably reinvest capital.

The Bottom Line

To sum it up, NCT Alliance Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And with a respectable 84% 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. Therefore, we think it would be worth your time to check if these trends are going to continue.

Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 4 warning signs for NCT Alliance Berhad (of which 3 shouldn't be ignored!) that you should know about.

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.