Shin Yang Shipping Corporation Berhad (KLSE:SYSCORP) Shareholders Will Want The ROCE Trajectory To Continue

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. So when we looked at Shin Yang Shipping Corporation Berhad (KLSE:SYSCORP) and its trend of ROCE, we really liked what we saw.

Understanding Return On Capital Employed (ROCE)

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. To calculate this metric for Shin Yang Shipping Corporation Berhad, this is the formula:

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

0.039 = RM41m ÷ (RM1.4b - RM350m) (Based on the trailing twelve months to September 2021).

So, Shin Yang Shipping Corporation Berhad has an ROCE of 3.9%. Ultimately, that's a low return and it under-performs the Shipping industry average of 11%.

Check out 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 want to delve into the historical earnings, revenue and cash flow of Shin Yang Shipping Corporation Berhad, check out these free graphs here.

What Does the ROCE Trend For Shin Yang Shipping Corporation Berhad Tell Us?

While the ROCE is still rather low for Shin Yang Shipping Corporation Berhad, we're glad to see it heading in the right direction. We found that the returns on capital employed over the last five years have risen by 190%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Interestingly, the business may be becoming more efficient because it's applying 24% less capital than it was five years ago. Shin Yang Shipping Corporation Berhad may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

What We Can Learn From Shin Yang Shipping Corporation Berhad's ROCE

From what we've seen above, Shin Yang Shipping Corporation Berhad has managed to increase it's returns on capital all the while reducing it's capital base. Considering the stock has delivered 30% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

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.