International Cement Group (SGX:KUO) Might Have The Makings Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in International Cement Group's (SGX:KUO) returns on capital, so let's have a look.

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. The formula for this calculation on International Cement Group is:

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

0.14 = S$41m ÷ (S$337m - S$46m) (Based on the trailing twelve months to December 2020).

So, International Cement Group has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Basic Materials industry average of 9.4% it's much better.

Check out our latest analysis for International Cement Group

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

The Trend Of ROCE

The trends we've noticed at International Cement Group are quite reassuring. The numbers show that in the last four years, the returns generated on capital employed have grown considerably to 14%. Basically the business is earning more per dollar of capital invested and in addition to that, 381% more capital is being employed now too. 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.

In Conclusion...

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 International Cement Group has. Since the stock has returned a solid 52% to shareholders over the last three years, it's fair to say investors are beginning to recognize these changes. In light of that, we think it's worth looking further into this stock because if International Cement Group can keep these trends up, it could have a bright future ahead.

If you want to continue researching International Cement Group, you might be interested to know about the 2 warning signs that our analysis has discovered.

While International Cement Group 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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