There's Been No Shortage Of Growth Recently For YTL Corporation Berhad's (KLSE:YTL) Returns On Capital

Did you know there are some financial metrics that can provide clues of a potential 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. 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 YTL Corporation Berhad's (KLSE:YTL) returns on capital, so let's have a look.

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 YTL Corporation Berhad is:

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

0.094 = RM6.6b ÷ (RM86b - RM15b) (Based on the trailing twelve months to September 2024).

Therefore, YTL Corporation Berhad has an ROCE of 9.4%. On its own that's a low return, but compared to the average of 5.8% generated by the Integrated Utilities industry, it's much better.

Check out our latest analysis for YTL Corporation Berhad

Above you can see how the current ROCE for YTL Corporation Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for YTL Corporation Berhad .

How Are Returns Trending?

YTL Corporation Berhad's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 163% whilst employing roughly the same amount of capital. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. 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 Bottom Line

In summary, we're delighted to see that YTL Corporation Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 187% total return over the last five years tells us that investors are expecting more good things to come in the future. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing YTL Corporation Berhad we've found 2 warning signs (1 is concerning!) that you should be aware of before investing here.

While YTL 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.