11 hours ago
Returns At MBM Resources Berhad (KLSE:MBMR) Are On The Way Up
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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, MBM Resources Berhad (KLSE:MBMR) looks quite promising in regards to its trends of return on capital.
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If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for MBM Resources Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0054 = RM14m ÷ (RM2.8b - RM174m) (Based on the trailing twelve months to March 2025).
Thus, MBM Resources Berhad has an ROCE of 0.5%. In absolute terms, that's a low return and it also under-performs the Retail Distributors industry average of 8.9%.
View our latest analysis for MBM Resources Berhad
Above you can see how the current ROCE for MBM Resources Berhad 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 MBM Resources Berhad for free.
We're delighted to see that MBM Resources Berhad is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 0.5% which is a sight for sore eyes. Not only that, but the company is utilizing 29% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.
Long story short, we're delighted to see that MBM Resources Berhad's reinvestment activities have paid off and the company is now profitable. And a remarkable 135% total return over the last five years tells us that investors are expecting more good things to come in the future. 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.
One more thing to note, we've identified 1 warning sign with MBM Resources Berhad and understanding it should be part of your investment process.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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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