Investors Will Want Global Palm Resources Holdings' (SGX:BLW) Growth In ROCE To Persist

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. So on that note, Global Palm Resources Holdings (SGX:BLW) looks quite promising in regards to its trends of return on capital.

Understanding Return On Capital Employed (ROCE)

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed 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)

0.18 = Rp163b ÷ (Rp1.0t - Rp110b) (Based on the trailing twelve months to June 2022).

Therefore, Global Palm Resources Holdings has an ROCE of 18%. In absolute terms, that's a satisfactory return, but compared to the Food industry average of 11% it's much better.

Check out the opportunities and risks within the SG Food industry.

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

What The Trend Of ROCE Can Tell Us

The trends we've noticed at Global Palm Resources Holdings are quite reassuring. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 18%. The amount of capital employed has increased too, by 32%. 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 Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Global Palm Resources Holdings has. Astute investors may have an opportunity here because the stock has declined 45% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about Global Palm Resources Holdings, we've spotted 2 warning signs, and 1 of them is a bit unpleasant.

While Global Palm Resources Holdings 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.