06-03-2025
Returns Are Gaining Momentum At Malaysian Resources Corporation Berhad (KLSE:MRCB)
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. With that in mind, we've noticed some promising trends at Malaysian Resources Corporation Berhad (KLSE:MRCB) so let's look a bit deeper.
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. The formula for this calculation on Malaysian Resources Corporation Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.025 = RM173m ÷ (RM9.3b - RM2.3b) (Based on the trailing twelve months to December 2024).
Thus, Malaysian Resources Corporation Berhad has an ROCE of 2.5%. Ultimately, that's a low return and it under-performs the Construction industry average of 9.1%.
View our latest analysis for Malaysian Resources Corporation Berhad
In the above chart we have measured Malaysian Resources Corporation Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Malaysian Resources Corporation Berhad .
Malaysian Resources Corporation Berhad has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 2.5% on its capital, because five years ago it was incurring losses. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.
In summary, we're delighted to see that Malaysian Resources Corporation Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Given the stock has declined 16% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
If you want to continue researching Malaysian Resources Corporation Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.
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.
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