What are the early trends we should look for to identify a stock that could 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. In light of that, when we looked at Ancom Logistics Berhad (KLSE:ANCOMLB) and its ROCE trend, we weren't exactly thrilled.
What Is Return On Capital Employed (ROCE)?
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 Ancom Logistics Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.032 = RM2.5m ÷ (RM95m - RM16m) (Based on the trailing twelve months to May 2025).
Thus, Ancom Logistics Berhad has an ROCE of 3.2%. Ultimately, that's a low return and it under-performs the Transportation industry average of 6.8%.
See our latest analysis for Ancom Logistics Berhad
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Ancom Logistics Berhad.
The Trend Of ROCE
In terms of Ancom Logistics Berhad's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 6.7%, but since then they've fallen to 3.2%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line
Bringing it all together, while we're somewhat encouraged by Ancom Logistics Berhad's reinvestment in its own business, we're aware that returns are shrinking. Moreover, since the stock has crumbled 76% over the last five years, it appears investors are expecting the worst. Therefore based on the analysis done in this article, we don't think Ancom Logistics Berhad has the makings of a multi-bagger.
One more thing: We've identified 3 warning signs with Ancom Logistics Berhad (at least 1 which is concerning) , and understanding them would certainly be useful.
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.