Returns Are Gaining Momentum At Cepatwawasan Group Berhad (KLSE:CEPAT)
If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base 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. So on that note, Cepatwawasan Group Berhad (KLSE:CEPAT) looks quite promising in regards to its trends of return on capital.
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 Cepatwawasan Group Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.066 = RM30m ÷ (RM490m - RM39m) (Based on the trailing twelve months to September 2024).
So, Cepatwawasan Group Berhad has an ROCE of 6.6%. In absolute terms, that's a low return but it's around the Food industry average of 8.2%.
Check out our latest analysis for Cepatwawasan Group Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Cepatwawasan Group Berhad's ROCE against it's prior returns. If you'd like to look at how Cepatwawasan Group Berhad has performed in the past in other metrics, you can view this free graph of Cepatwawasan Group Berhad's past earnings, revenue and cash flow.
Cepatwawasan Group Berhad's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 888% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
To bring it all together, Cepatwawasan Group Berhad has done well to increase the returns it's generating from its capital employed. Since the stock has returned a solid 50% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.
If you'd like to know about the risks facing Cepatwawasan Group Berhad, we've discovered 2 warning signs that you should be aware of.
While Cepatwawasan Group Berhad 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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