Global Palm Resources Holdings (SGX:BLW) Is Doing The Right Things To Multiply Its Share Price

By
Simply Wall St
Published
May 14, 2022
SGX:BLW
Source: Shutterstock

To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So on that note, Global Palm Resources Holdings (SGX:BLW) looks quite promising in regards to its trends of return on capital.

What is 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. To calculate this metric for Global Palm Resources Holdings, this is the formula:

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

0.15 = Rp131b ÷ (Rp933b - Rp59b) (Based on the trailing twelve months to December 2021).

So, Global Palm Resources Holdings has an ROCE of 15%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 11% it's much better.

Check out our latest analysis for Global Palm Resources Holdings

roce
SGX:BLW Return on Capital Employed May 14th 2022

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 Global Palm Resources Holdings, check out these free graphs here.

How Are Returns Trending?

Investors would be pleased with what's happening at Global Palm Resources Holdings. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 15%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 25%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Bottom Line

All in all, it's terrific to see that Global Palm Resources Holdings is reaping the rewards from prior investments and is growing its capital base. And since the stock has fallen 41% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

One final note, you should learn about the 3 warning signs we've spotted with Global Palm Resources Holdings (including 1 which is concerning) .

While Global Palm Resources Holdings 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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