Investors Will Want Shin Yang Shipping Corporation Berhad's (KLSE:SYSCORP) Growth In ROCE To Persist

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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 Shin Yang Shipping Corporation Berhad's (KLSE:SYSCORP) returns on capital, so let's have a look.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Shin Yang Shipping Corporation Berhad is:

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

0.14 = RM168m ÷ (RM1.5b - RM327m) (Based on the trailing twelve months to June 2022).

Thus, Shin Yang Shipping Corporation Berhad has an ROCE of 14%. 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 Shin Yang Shipping Corporation 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 Shin Yang Shipping Corporation Berhad's past further, check out this free graph of past earnings, revenue and cash flow.

How Are Returns Trending?

Shin Yang Shipping Corporation Berhad is showing promise given that its ROCE is trending up and to the right. The figures show that over the last five years, ROCE has grown 1,281% whilst employing roughly the same amount of capital. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Key Takeaway

As discussed above, Shin Yang Shipping Corporation Berhad appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation on our platform that is definitely worth checking out.

While Shin Yang Shipping Corporation 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.