BBR Holdings (S) (SGX:KJ5) Might Have The Makings Of A Multi-Bagger

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So on that note, BBR Holdings (S) (SGX:KJ5) looks quite promising in regards to its trends of return on capital.

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. To calculate this metric for BBR Holdings (S), this is the formula:

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

0.046 = S$10m ÷ (S$318m - S$91m) (Based on the trailing twelve months to December 2022).

Therefore, BBR Holdings (S) has an ROCE of 4.6%. Even though it's in line with the industry average of 4.8%, it's still a low return by itself.

See our latest analysis for BBR Holdings (S)

Historical performance is a great place to start when researching a stock so above you can see the gauge for BBR Holdings (S)'s ROCE against it's prior returns. If you're interested in investigating BBR Holdings (S)'s past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that BBR Holdings (S) is reaping rewards from its investments and has now broken into profitability. The company now earns 4.6% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by BBR Holdings (S) has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.

What We Can Learn From BBR Holdings (S)'s ROCE

To bring it all together, BBR Holdings (S) has done well to increase the returns it's generating from its capital employed. And since the stock has fallen 33% over the last five years, there might be an opportunity here. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

On a final note, we found 4 warning signs for BBR Holdings (S) (2 are concerning) you should be aware of.

While BBR Holdings (S) 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.