International Cement Group's (SGX:KUO) Returns On Capital Are Heading Higher

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at International Cement Group (SGX:KUO) and its trend of ROCE, we really liked what we saw.

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. To calculate this metric for International Cement Group, this is the formula:

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%. On its own, that's a standard return, however it's much better than the 9.8% generated by the Basic Materials industry.

View 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're interested in investigating International Cement Group's past further, check out this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

Investors would be pleased with what's happening at International Cement Group. The data shows that returns on capital have increased substantially over the last four years 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.

What We Can Learn From International Cement Group's ROCE

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. And since the stock has fallen 31% over the last three years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing, we've spotted 2 warning signs facing International Cement Group that you might find interesting.

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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