Investors Will Want Malaysian Bulk Carriers Berhad's (KLSE:MAYBULK) Growth In ROCE To Persist

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. With that in mind, we've noticed some promising trends at Malaysian Bulk Carriers Berhad (KLSE:MAYBULK) so let's look a bit deeper.

Return On Capital Employed (ROCE): What is it?

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 Malaysian Bulk Carriers Berhad:

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

0.15 = RM77m ÷ (RM563m - RM60m) (Based on the trailing twelve months to March 2022).

Therefore, Malaysian Bulk Carriers Berhad has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Shipping industry average of 9.6% it's much better.

View our latest analysis for Malaysian Bulk Carriers 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'd like to look at how Malaysian Bulk Carriers Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

It's great to see that Malaysian Bulk Carriers Berhad has started to generate some pre-tax earnings from prior investments. The company was generating losses five years ago, but now it's turned around, earning 15% which is no doubt a relief for some early shareholders. In regards to capital employed, Malaysian Bulk Carriers Berhad is using 62% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. This could potentially mean that the company is selling some of its assets.

The Bottom Line On Malaysian Bulk Carriers Berhad's ROCE

In summary, it's great to see that Malaysian Bulk Carriers Berhad has been able to turn things around and earn higher returns on lower amounts of capital. And since the stock has fallen 42% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

If you'd like to know about the risks facing Malaysian Bulk Carriers Berhad, we've discovered 1 warning sign that you should be aware of.

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.

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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.