Investors Shouldn't Overlook Harbour-Link Group Berhad's (KLSE:HARBOUR) Impressive Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. 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.

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. 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)

0.22 = RM150m ÷ (RM867m - RM179m) (Based on the trailing twelve months to March 2022).

So, Harbour-Link Group Berhad has an ROCE of 22%. That's a fantastic return and not only that, it outpaces the average of 9.6% earned by companies in a similar industry.

See our latest analysis for Harbour-Link Group 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're interested in investigating Harbour-Link Group Berhad's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Investors would be pleased with what's happening at Harbour-Link Group Berhad. Over the last five years, returns on capital employed have risen substantially to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 53% more capital is being employed now too. So we're very much inspired by what we're seeing at Harbour-Link Group Berhad thanks to its ability to profitably reinvest capital.

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

All in all, it's terrific to see that Harbour-Link Group Berhad is reaping the rewards from prior investments and is growing its capital base. Since the stock has returned a staggering 118% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 1 warning sign facing Harbour-Link Group Berhad that you might find interesting.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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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.