We Think Wasco Berhad (KLSE:WASCO) Might Have The DNA Of A Multi-Bagger
We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.
Understanding Return On Capital Employed (ROCE)
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Wasco Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.21 = RM280m ÷ (RM2.7b - RM1.4b) (Based on the trailing twelve months to March 2025).
Thus, Wasco Berhad has an ROCE of 21%. In absolute terms that's a great return and it's even better than the Energy Services industry average of 11%.
Check out our latest analysis for Wasco Berhad
In the above chart we have measured Wasco Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Wasco Berhad .
What Can We Tell From Wasco Berhad's ROCE Trend?
Wasco Berhad's ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 678% whilst employing roughly the same amount of capital. 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. It's worth looking deeper into this though because while it's great that the business is more efficient, it might also mean that going forward the areas to invest internally for the organic growth are lacking.
On a side note, Wasco Berhad's current liabilities are still rather high at 50% of total assets. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.
The Bottom Line
To bring it all together, Wasco Berhad has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. 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.
Before jumping to any conclusions though, we need to know what value we're getting for the current share price. That's where you can check out our that compares the share price and estimated value.
If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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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