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Yahoo
07-04-2025
- Business
- Yahoo
Capital Allocation Trends At Kobay Technology Bhd (KLSE:KOBAY) Aren't Ideal
To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Kobay Technology Bhd (KLSE:KOBAY) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. 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 Kobay Technology Bhd is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.051 = RM23m ÷ (RM610m - RM153m) (Based on the trailing twelve months to December 2024). Thus, Kobay Technology Bhd has an ROCE of 5.1%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 8.2%. Check out our latest analysis for Kobay Technology Bhd Historical performance is a great place to start when researching a stock so above you can see the gauge for Kobay Technology Bhd's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Kobay Technology Bhd . When we looked at the ROCE trend at Kobay Technology Bhd, we didn't gain much confidence. To be more specific, ROCE has fallen from 12% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run. While returns have fallen for Kobay Technology Bhd in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. And the stock has done incredibly well with a 171% return over the last five years, so long term investors are no doubt ecstatic with that result. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further. On a final note, we found 2 warning signs for Kobay Technology Bhd (1 makes us a bit uncomfortable) you should be aware of. While Kobay Technology Bhd 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.
Yahoo
18-02-2025
- Business
- Yahoo
Here's What's Concerning About Solarvest Holdings Berhad's (KLSE:SLVEST) Returns On Capital
What are the early trends we should look for to identify a stock that could multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. However, after investigating Solarvest Holdings Berhad (KLSE:SLVEST), we don't think it's current trends fit the mold of a multi-bagger. 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 Solarvest Holdings Berhad, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.13 = RM62m ÷ (RM610m - RM133m) (Based on the trailing twelve months to September 2024). So, Solarvest Holdings Berhad has an ROCE of 13%. That's a relatively normal return on capital, and it's around the 11% generated by the Electrical industry. View our latest analysis for Solarvest Holdings Berhad Above you can see how the current ROCE for Solarvest Holdings Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Solarvest Holdings Berhad . We weren't thrilled with the trend because Solarvest Holdings Berhad's ROCE has reduced by 45% over the last five years, while the business employed 587% more capital. That being said, Solarvest Holdings Berhad raised some capital prior to their latest results being released, so that could partly explain the increase in capital employed. It's unlikely that all of the funds raised have been put to work yet, so as a consequence Solarvest Holdings Berhad might not have received a full period of earnings contribution from it. On a side note, Solarvest Holdings Berhad has done well to pay down its current liabilities to 22% of total assets. So we could link some of this to the decrease in ROCE. What's more, this can reduce some aspects of risk to the business because now the company's suppliers or short-term creditors are funding less of its operations. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE. We're a bit apprehensive about Solarvest Holdings Berhad because despite more capital being deployed in the business, returns on that capital and sales have both fallen. Yet despite these poor fundamentals, the stock has gained a huge 116% over the last five years, so investors appear very optimistic. Regardless, we don't feel too comfortable with the fundamentals so we'd be steering clear of this stock for now. If you're still interested in Solarvest Holdings Berhad it's worth checking out our to see if it's trading at an attractive price in other respects. While Solarvest Holdings 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. 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
