If you want to identify your next multibagger, there are some important trends to look out for. Ideally, your business will see two trends.grow first return One is capital employed (ROCE) and the second is increasing. amount of capital employed. This essentially means that the company has a profitable endeavor that can be continuously reinvested, which is the nature of compound interest. Having said that, at first glance, Petron Malaysia Refining & Marketing BHD (KLSE:PETRONM) I'm not going to jump out of my chair on how the returns are trending, but let's take a deeper look.
About Return on Capital Employed (ROCE)
For those who aren't sure what ROCE is, it measures the amount of pre-tax profit a company can generate from the capital employed in its business. Analysts use the following formula to calculate Petron Malaysia Refining & Marketing Bhd's profit.
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.13 = RM332m ÷ (RM5.1b – RM2.5b) (Based on the previous 12 months to September 2023).
therefore, Petron Malaysia Refining & Marketing Bhd's ROCE is 13%. This itself is a normal return on capital and is in line with the industry's average return of 13%.
Check out our latest analysis for Petron Malaysia Refining & Marketing Bhd.
In the chart above, we have measured Petron Malaysia Refining & Marketing Bhd's previous ROCE against its previous performance, but the future is probably more important. If you wish, you can check out forecasts made by the analysts covering Petron Malaysia Refining & Marketing Bhd here. free.
What can we tell from Petron Malaysia Refining & Marketing Bhd's ROCE trend?
When we looked at Petron Malaysia Refining & Marketing Bhd's ROCE trends, we weren't very confident. About five years ago, the return on capital was 23%, but since then he has reduced it to 13%. On the other hand, the company is deploying more capital without seeing any improvement in sales over the last year, which could suggest that these investments are a long-term strategy. It's worth keeping an eye on the company's earnings going forward to see if these investments ultimately contribute to its bottom line.
Another thing to note is that Petron Malaysia Refining & Marketing Bhd has a high current liability to total assets ratio of 49%. This may create a certain degree of risk because we essentially operate with a substantial reliance on suppliers and other short-term creditors. Ideally, we would like this to decrease, as a decrease would mean fewer risk-bearing obligations.
Our take on Petron Malaysia Refining & Marketing Bhd's ROCE
In conclusion, we see that Petron Malaysia Refining & Marketing Bhd is reinvesting in its business, but its earnings are declining. Investors may also be less optimistic about this trend improving, as the stock has fallen 17% over the past five years. So, based on the analysis conducted in this article, we don't think Petron Malaysia Refining & Marketing Bhd has the makings of a multibagger.
Like most companies, Petron Malaysia Refining & Marketing Bhd is subject to some risks. two warning signs What you need to know.
Petron Malaysia Refining & Marketing Bhd may not be the most profitable company right now, but we've made a list of companies that are currently generating a return on equity of over 25%.check this out free I'll list them here.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
