Stock Analysis

FM Global Logistics Holdings Berhad (KLSE:FM) Is Doing The Right Things To Multiply Its Share Price

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To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in FM Global Logistics Holdings Berhad's (KLSE:FM) returns on capital, so let's have a look.

Understanding 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. The formula for this calculation on FM Global Logistics Holdings Berhad is:

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

0.10 = RM46m ÷ (RM600m - RM157m) (Based on the trailing twelve months to September 2021).

Therefore, FM Global Logistics Holdings Berhad has an ROCE of 10%. In absolute terms, that's a satisfactory return, but compared to the Shipping industry average of 7.3% it's much better.

Check out our latest analysis for FM Global Logistics Holdings Berhad

KLSE:FM Return on Capital Employed February 23rd 2022

Above you can see how the current ROCE for FM Global Logistics Holdings Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering FM Global Logistics Holdings Berhad here for free.

What Can We Tell From FM Global Logistics Holdings Berhad's ROCE Trend?

We like the trends that we're seeing from FM Global Logistics Holdings Berhad. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 10%. The amount of capital employed has increased too, by 31%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what FM Global Logistics Holdings Berhad has. And a remarkable 150% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if FM Global Logistics Holdings Berhad can keep these trends up, it could have a bright future ahead.

One more thing to note, we've identified 1 warning sign with FM Global Logistics Holdings Berhad and understanding it should be part of your investment process.

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.

Valuation is complex, but we're helping make it simple.

Find out whether FM Global Logistics Holdings Berhad is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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