17-02-2025
Returns On Capital At CAM Resources Berhad (KLSE:CAMRES) Have Hit The Brakes
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after investigating CAM Resources Berhad (KLSE:CAMRES), we don't think it's current trends fit the mold of a multi-bagger.
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 CAM Resources Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.049 = RM7.8m ÷ (RM189m - RM30m) (Based on the trailing twelve months to September 2024).
Thus, CAM Resources Berhad has an ROCE of 4.9%. In absolute terms, that's a low return and it also under-performs the Consumer Durables industry average of 6.9%.
Check out our latest analysis for CAM Resources Berhad
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating CAM Resources Berhad's past further, check out this free graph covering CAM Resources Berhad's past earnings, revenue and cash flow.
Over the past five years, CAM Resources Berhad's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at CAM Resources Berhad in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.
In a nutshell, CAM Resources Berhad has been trudging along with the same returns from the same amount of capital over the last five years. And with the stock having returned a mere 23% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.
If you'd like to know more about CAM Resources Berhad, we've spotted 4 warning signs, and 1 of them can't be ignored.
While CAM Resources Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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