Will Uchi Technologies Berhad (KLSE:UCHITEC) Become A Multi-Bagger?

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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 the ROCE trend of Uchi Technologies Berhad (KLSE:UCHITEC) we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Uchi Technologies Berhad:

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

0.38 = RM68m ÷ (RM214m - RM36m) (Based on the trailing twelve months to September 2020).

So, Uchi Technologies Berhad has an ROCE of 38%. That's a fantastic return and not only that, it outpaces the average of 12% earned by companies in a similar industry.

See our latest analysis for Uchi Technologies Berhad

In the above chart we have measured Uchi Technologies Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Uchi Technologies Berhad.

How Are Returns Trending?

Uchi Technologies Berhad has not disappointed in regards to ROCE growth. We found that the returns on capital employed over the last five years have risen by 68%. That's not bad because this tells for every dollar invested (capital employed), the company is increasing the amount earned from that dollar. In regards to capital employed, Uchi Technologies Berhad appears to been achieving more with less, since the business is using 24% less capital to run its operation. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

The Bottom Line On Uchi Technologies Berhad's ROCE

In a nutshell, we're pleased to see that Uchi Technologies Berhad has been able to generate higher returns from less capital. Since the stock has returned a staggering 176% to shareholders over the last five years, it looks like investors are recognizing these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

If you want to continue researching Uchi Technologies Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.

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This article by Simply Wall St is general in nature. 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.
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