Returns At Amtel Holdings Berhad (KLSE:AMTEL) Are On The Way Up

What trends should we look for it we want to identify stocks that can 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, we've noticed some promising trends at Amtel Holdings Berhad (KLSE:AMTEL) so let's look a bit deeper.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Amtel Holdings Berhad, this is the formula:

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

0.051 = RM3.4m ÷ (RM83m - RM16m) (Based on the trailing twelve months to November 2022).

So, Amtel Holdings Berhad has an ROCE of 5.1%. Ultimately, that's a low return and it under-performs the Electronic industry average of 16%.

Check out our latest analysis for Amtel Holdings Berhad

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

SWOT Analysis for Amtel Holdings Berhad

What Can We Tell From Amtel Holdings Berhad's ROCE Trend?

Amtel Holdings Berhad has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 5.1% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Amtel Holdings Berhad is utilizing 53% more capital than it was five years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

The Key Takeaway

In summary, it's great to see that Amtel Holdings Berhad has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a solid 67% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Amtel Holdings Berhad does have some risks though, and we've spotted 3 warning signs for Amtel Holdings Berhad that you might be interested in.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.