What trends should you look for to identify stocks with the potential to increase in value over the long term? Typically, you want to look at growth trends. return Increase in capital employed (ROCE) and expand accordingly base of capital employed. After all, this shows that this is a business that is increasing its profitability and reinvesting its profits. Having said that, at first glance, Kumpuran H&L Hi-tech Berhad (KLSE:HIGHTEC) The return trend won't get you out of your chair right away, but let's take a deeper look.
Return on Capital Employed (ROCE): What is it?
For those who don't know, ROCE is a measure of a company's annual pre-tax profit (return) on the capital employed in the business. Analysts use the following formula to calculate Kumpulan H&L Hi-Tech Berhad.
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.049 = RM8.3m ÷ (RM173m – RM4.7m) (Based on the previous 12 months to October 2023).
therefore, Kumpulan H&L High-Tech Berhad's ROCE is 4.9%. In absolute terms, this is a low return, lower than the machinery industry average of 10.0%.
Check out our latest analysis for Kumpulan H&L High-Tech Berhad.
Past performance is a great starting point when researching a stock. So, above, you can see Kumpulan H&L High-Tech Berhad's ROCE metrics against past returns. If you are interested in delving further into the past of Kumpulan H&L High-Tech Berhad, check out this free A graph covering Kumpulan H&L High-Tech Berhad's historical earnings, revenue, and cash flow.
What can we learn from Kumpulan H&L High-Tech Berhad's ROCE trend?
Kumpulan H&L High-Tech Berhad's return on equity has not changed much in recent years. The company has deployed 66% more capital over the past five years, and its return on capital has remained stable at 4.9%. This poor ROCE of his does not inspire confidence at the moment, and with the increase in capital employed, it is clear that the company is not investing its money in high-returning investments.
What we can learn from Kumpulan H&L High-Tech Berhad's ROCE
As we have seen above, Kumpulan H&L High-Tech Berhad's return on capital is not increasing, but it is reinvesting in the business. Investors must be thinking better things are ahead, as the share price has been knocked out of the park, delivering a 142% return to shareholders who have held it over the past five years. After all, if the underlying trends hold, we won't be holding our breath to become multibaggers in the future.
Another thing we discovered two warning signs It could be interesting to play against Kumpulan H&L High-Tech Berhad.
Kumpulan H&L High-Tech Berhad may not be the most profitable, but check this out. free A list of companies with solid balance sheets and high return on equity.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our editorial team at Simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, 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.
