Returns At Willowglen MSC Berhad (KLSE:WILLOW) Appear To Be Weighed Down

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Having said that, from a first glance at Willowglen MSC Berhad (KLSE:WILLOW) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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. To calculate this metric for Willowglen MSC Berhad, this is the formula:

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

0.088 = RM19m ÷ (RM251m - RM38m) (Based on the trailing twelve months to March 2024).

So, Willowglen MSC Berhad has an ROCE of 8.8%. In absolute terms, that's a low return and it also under-performs the Software industry average of 11%.

View our latest analysis for Willowglen MSC Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Willowglen MSC Berhad's ROCE against it's prior returns. If you're interested in investigating Willowglen MSC Berhad's past further, check out this free graph covering Willowglen MSC Berhad's past earnings, revenue and cash flow.

So How Is Willowglen MSC Berhad's ROCE Trending?

There are better returns on capital out there than what we're seeing at Willowglen MSC Berhad. The company has employed 32% more capital in the last five years, and the returns on that capital have remained stable at 8.8%. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

The Key Takeaway

In conclusion, Willowglen MSC Berhad has been investing more capital into the business, but returns on that capital haven't increased. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

On a final note, we found 4 warning signs for Willowglen MSC Berhad (1 shouldn't be ignored) you should be aware of.

While Willowglen 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com