We Think AnAn International (SGX:Y35) Might Have The DNA Of A Multi-Bagger

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in AnAn International's (SGX:Y35) returns on capital, so let's have a look.

What Is Return On Capital Employed (ROCE)?

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 AnAn International is:

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

0.22 = US$43m ÷ (US$601m - US$408m) (Based on the trailing twelve months to September 2023).

Thus, AnAn International has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Oil and Gas industry average of 15%.

Check out our latest analysis for AnAn International

Historical performance is a great place to start when researching a stock so above you can see the gauge for AnAn International's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of AnAn International, check out these free graphs here.

The Trend Of ROCE

The fact that AnAn International is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 22% on its capital. In addition to that, AnAn International is employing 59% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

On a separate but related note, it's important to know that AnAn International has a current liabilities to total assets ratio of 68%, which we'd consider pretty high. This effectively means that suppliers (or short-term creditors) are funding a large portion of the business, so just be aware that this can introduce some elements of risk. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

The Bottom Line On AnAn International's ROCE

In summary, it's great to see that AnAn International has managed to break into profitability and is continuing to reinvest in its business. Since the stock has returned a staggering 600% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if AnAn International can keep these trends up, it could have a bright future ahead.

If you want to continue researching AnAn International, you might be interested to know about the 4 warning signs that our analysis has discovered.

AnAn International is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.