Does mDR (SGX:Y3D) Have The Makings Of A Multi-Bagger?

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, mDR (SGX:Y3D) looks quite promising in regards to its trends of return on capital.

Understanding 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. Analysts use this formula to calculate it for mDR:

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

0.031 = S$3.9m ÷ (S$179m - S$53m) (Based on the trailing twelve months to June 2020).

Therefore, mDR has an ROCE of 3.1%. Ultimately, that's a low return and it under-performs the Electronic industry average of 13%.

Check out our latest analysis for mDR

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

The Trend Of ROCE

mDR has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 3.1% which is a sight for sore eyes. Not only that, but the company is utilizing 106% more capital than before, but that's to be expected from a company 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.

The Bottom Line

To the delight of most shareholders, mDR has now broken into profitability. Although the company may be facing some issues elsewhere since the stock has plunged 82% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

Like most companies, mDR does come with some risks, and we've found 2 warning signs that you should be aware of.

While mDR 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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This article by Simply Wall St is general in nature. 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.
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