Returns On Capital At Suria Capital Holdings Berhad (KLSE:SURIA) Have Stalled

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing 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. Having said that, from a first glance at Suria Capital Holdings Berhad (KLSE:SURIA) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Suria Capital Holdings Berhad, this is the formula:

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

0.034 = RM46m ÷ (RM1.4b - RM39m) (Based on the trailing twelve months to June 2021).

So, Suria Capital Holdings Berhad has an ROCE of 3.4%. Ultimately, that's a low return and it under-performs the Infrastructure industry average of 6.7%.

View our latest analysis for Suria Capital Holdings 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, revenue and cash flow of Suria Capital Holdings Berhad, check out these free graphs here.

What Can We Tell From Suria Capital Holdings Berhad's ROCE Trend?

Over the past five years, Suria Capital Holdings Berhad's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Suria Capital Holdings Berhad doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Suria Capital Holdings Berhad's ROCE

In a nutshell, Suria Capital Holdings Berhad has been trudging along with the same returns from the same amount of capital over the last five years. And investors appear hesitant that the trends will pick up because the stock has fallen 13% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you'd like to know more about Suria Capital Holdings Berhad, we've spotted 3 warning signs, and 1 of them can't be ignored.

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.

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.

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