Rex International Holding's (SGX:5WH) Returns On Capital Are Heading Higher

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7 hours ago

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, Rex International Holding (SGX:5WH) looks quite promising in regards to its trends of return on capital.
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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. To calculate this metric for Rex International Holding, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.041 = US$19m ÷ (US$572m - US$107m) (Based on the trailing twelve months to December 2024).
Therefore, Rex International Holding has an ROCE of 4.1%. Even though it's in line with the industry average of 4.3%, it's still a low return by itself.
Check out our latest analysis for Rex International Holding
Above you can see how the current ROCE for Rex International Holding compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Rex International Holding for free.
The fact that Rex International Holding is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 4.1% on its capital. And unsurprisingly, like most companies trying to break into the black, Rex International Holding is utilizing 195% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.
To the delight of most shareholders, Rex International Holding has now broken into profitability. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 3.5% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
If you'd like to know about the risks facing Rex International Holding, we've discovered 1 warning sign that you should be aware of.
While Rex International Holding 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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