Tri-Mode System (M) Berhad (KLSE:TRIMODE) Is Doing The Right Things To Multiply Its Share Price

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Tri-Mode System (M) Berhad (KLSE:TRIMODE) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Tri-Mode System (M) Berhad is:

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

0.024 = RM3.6m ÷ (RM169m - RM19m) (Based on the trailing twelve months to March 2024).

So, Tri-Mode System (M) Berhad has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Logistics industry average of 6.3%.

View our latest analysis for Tri-Mode System (M) Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Tri-Mode System (M) Berhad's ROCE against it's prior returns. If you'd like to look at how Tri-Mode System (M) Berhad has performed in the past in other metrics, you can view this free graph of Tri-Mode System (M) Berhad's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. The data shows that returns on capital have increased substantially over the last five years to 2.4%. Basically the business is earning more per dollar of capital invested and in addition to that, 58% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line On Tri-Mode System (M) Berhad's ROCE

All in all, it's terrific to see that Tri-Mode System (M) Berhad is reaping the rewards from prior investments and is growing its capital base. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

If you'd like to know more about Tri-Mode System (M) Berhad, we've spotted 3 warning signs, and 1 of them makes us a bit uncomfortable.

While Tri-Mode System (M) Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.

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