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Yahoo
27-05-2025
- Business
- Yahoo
LTKM Berhad's (KLSE:LTKM) Returns On Capital Not Reflecting Well On The Business
What underlying fundamental trends can indicate that a company might be in decline? Businesses in decline often have two underlying trends, firstly, a declining return on capital employed (ROCE) and a declining base of capital employed. This indicates to us that the business is not only shrinking the size of its net assets, but its returns are falling as well. So after glancing at the trends within LTKM Berhad (KLSE:LTKM), we weren't too hopeful. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. 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 LTKM Berhad, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.063 = RM22m ÷ (RM428m - RM77m) (Based on the trailing twelve months to December 2024). Therefore, LTKM Berhad has an ROCE of 6.3%. In absolute terms, that's a low return and it also under-performs the Food industry average of 9.2%. See our latest analysis for LTKM Berhad Historical performance is a great place to start when researching a stock so above you can see the gauge for LTKM Berhad's ROCE against it's prior returns. If you're interested in investigating LTKM Berhad's past further, check out this free graph covering LTKM Berhad's past earnings, revenue and cash flow. We are a bit worried about the trend of returns on capital at LTKM Berhad. About five years ago, returns on capital were 13%, however they're now substantially lower than that as we saw above. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on LTKM Berhad becoming one if things continue as they have. In summary, it's unfortunate that LTKM Berhad is generating lower returns from the same amount of capital. Investors must expect better things on the horizon though because the stock has risen 24% in the last five years. Regardless, we don't like the trends as they are and if they persist, we think you might find better investments elsewhere. LTKM Berhad does have some risks though, and we've spotted 2 warning signs for LTKM Berhad that you might be interested in. 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.
Yahoo
05-05-2025
- Business
- Yahoo
Muar Ban Lee Group Berhad's (KLSE:MBL) Solid Earnings May Rest On Weak Foundations
Muar Ban Lee Group Berhad's (KLSE:MBL) robust recent earnings didn't do much to move the stock. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. Many investors haven't heard of the accrual ratio from cashflow, but it is actually a useful measure of how well a company's profit is backed up by free cash flow (FCF) during a given period. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. The ratio shows us how much a company's profit exceeds its FCF. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. That is not intended to imply we should worry about a positive accrual ratio, but it's worth noting where the accrual ratio is rather high. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". For the year to December 2024, Muar Ban Lee Group Berhad had an accrual ratio of 0.26. Unfortunately, that means its free cash flow fell significantly short of its reported profits. Even though it reported a profit of RM36.6m, a look at free cash flow indicates it actually burnt through RM22m in the last year. We also note that Muar Ban Lee Group Berhad's free cash flow was actually negative last year as well, so we could understand if shareholders were bothered by its outflow of RM22m. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Muar Ban Lee Group Berhad. Muar Ban Lee Group Berhad's accrual ratio for the last twelve months signifies cash conversion is less than ideal, which is a negative when it comes to our view of its earnings. Because of this, we think that it may be that Muar Ban Lee Group Berhad's statutory profits are better than its underlying earnings power. But the good news is that its EPS growth over the last three years has been very impressive. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. To that end, you should learn about the 2 warning signs we've spotted with Muar Ban Lee Group Berhad (including 1 which is significant). This note has only looked at a single factor that sheds light on the nature of Muar Ban Lee Group Berhad's profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. 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.
Yahoo
14-04-2025
- Business
- Yahoo
Some Investors May Be Worried About Orgabio Holdings Berhad's (KLSE:ORGABIO) Returns On Capital
If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after briefly looking over the numbers, we don't think Orgabio Holdings Berhad (KLSE:ORGABIO) has the makings of a multi-bagger going forward, but let's have a look at why that may be. We've discovered 2 warning signs about Orgabio Holdings Berhad. View them for free. 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 Orgabio Holdings Berhad, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.10 = RM6.9m ÷ (RM89m - RM22m) (Based on the trailing twelve months to December 2024). Therefore, Orgabio Holdings Berhad has an ROCE of 10%. By itself that's a normal return on capital and it's in line with the industry's average returns of 9.7%. Check out our latest analysis for Orgabio Holdings 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'd like to look at how Orgabio Holdings Berhad has performed in the past in other metrics, you can view this free graph of Orgabio Holdings Berhad's past earnings, revenue and cash flow. In terms of Orgabio Holdings Berhad's historical ROCE movements, the trend isn't fantastic. Around five years ago the returns on capital were 23%, but since then they've fallen to 10%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run. Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Orgabio Holdings Berhad. These trends don't appear to have influenced returns though, because the total return from the stock has been mostly flat over the last year. So we think it'd be worthwhile to look further into this stock given the trends look encouraging. One final note, you should learn about the 2 warning signs we've spotted with Orgabio Holdings Berhad (including 1 which shouldn't be ignored) . For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.
Yahoo
01-04-2025
- Business
- Yahoo
Returns On Capital Signal Tricky Times Ahead For SFP Tech Holdings Berhad (KLSE:SFPTECH)
Did you know there are some financial metrics that can provide clues of a potential multi-bagger? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at SFP Tech Holdings Berhad (KLSE:SFPTECH) and its ROCE trend, we weren't exactly thrilled. The end of cancer? These 15 emerging AI stocks are developing tech that will allow early identification of life changing diseases like cancer and Alzheimer's. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on SFP Tech Holdings Berhad is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.082 = RM22m ÷ (RM321m - RM56m) (Based on the trailing twelve months to December 2024). Therefore, SFP Tech Holdings Berhad has an ROCE of 8.2%. On its own that's a low return on capital but it's in line with the industry's average returns of 8.2%. View our latest analysis for SFP Tech Holdings Berhad In the above chart we have measured SFP Tech Holdings Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering SFP Tech Holdings Berhad for free. On the surface, the trend of ROCE at SFP Tech Holdings Berhad doesn't inspire confidence. Around five years ago the returns on capital were 23%, but since then they've fallen to 8.2%. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. If these investments prove successful, this can bode very well for long term stock performance. In summary, despite lower returns in the short term, we're encouraged to see that SFP Tech Holdings Berhad is reinvesting for growth and has higher sales as a result. These growth trends haven't led to growth returns though, since the stock has fallen 62% over the last year. So we think it'd be worthwhile to look further into this stock given the trends look encouraging. Since virtually every company faces some risks, it's worth knowing what they are, and we've spotted 3 warning signs for SFP Tech Holdings Berhad (of which 2 don't sit too well with us!) that you should know about. While SFP Tech Holdings Berhad 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) 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. Sign in to access your portfolio
Yahoo
25-03-2025
- Business
- Yahoo
Alpha IVF Group Berhad (KLSE:ALPHA) Knows How To Allocate Capital Effectively
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. Speaking of which, we noticed some great changes in Alpha IVF Group Berhad's (KLSE:ALPHA) returns on capital, so let's have a look. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Alpha IVF Group Berhad is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.34 = RM72m ÷ (RM233m - RM22m) (Based on the trailing twelve months to November 2024). Therefore, Alpha IVF Group Berhad has an ROCE of 34%. That's a fantastic return and not only that, it outpaces the average of 9.9% earned by companies in a similar industry. See our latest analysis for Alpha IVF Group Berhad Above you can see how the current ROCE for Alpha IVF Group Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Alpha IVF Group Berhad . Investors would be pleased with what's happening at Alpha IVF Group Berhad. Over the last four years, returns on capital employed have risen substantially to 34%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 226%. So we're very much inspired by what we're seeing at Alpha IVF Group Berhad thanks to its ability to profitably reinvest capital. On a related note, the company's ratio of current liabilities to total assets has decreased to 9.5%, which basically reduces it's funding from the likes of short-term creditors or suppliers. So shareholders would be pleased that the growth in returns has mostly come from underlying business performance. To sum it up, Alpha IVF Group Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. Since the stock has only returned 3.0% to shareholders over the last year, the promising fundamentals may not be recognized yet by investors. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up. If you'd like to know more about Alpha IVF Group Berhad, we've spotted 2 warning signs, and 1 of them makes us a bit uncomfortable. If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.
