Harbour-Link Group Berhad (KLSE:HARBOUR) Shareholders Will Want The ROCE Trajectory To Continue

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Speaking of which, we noticed some great changes in Harbour-Link Group Berhad's (KLSE:HARBOUR) returns on capital, so let's have a look.

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Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Harbour-Link Group Berhad is:

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

0.14 = RM143m ÷ (RM1.3b - RM230m) (Based on the trailing twelve months to December 2024).

So, Harbour-Link Group Berhad has an ROCE of 14%. On its own, that's a standard return, however it's much better than the 6.6% generated by the Shipping industry.

Check out our latest analysis for Harbour-Link Group Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Harbour-Link Group Berhad's ROCE against it's prior returns. If you'd like to look at how Harbour-Link Group Berhad has performed in the past in other metrics, you can view this free graph of Harbour-Link Group Berhad's past earnings, revenue and cash flow .

What The Trend Of ROCE Can Tell Us

Harbour-Link Group Berhad is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 14%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 93%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

What We Can Learn From Harbour-Link Group Berhad's ROCE

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 Harbour-Link Group Berhad has. Since the stock has returned a staggering 183% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Harbour-Link Group 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 Harbour-Link Group Berhad and understanding it should be part of your investment process.

While Harbour-Link Group Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.