Latest news with #RM77m
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
09-04-2025
- Business
- Yahoo
UMediC Group Berhad's (KLSE:UMC) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?
UMediC Group Berhad (KLSE:UMC) has had a rough three months with its share price down 37%. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. In this article, we decided to focus on UMediC Group Berhad's ROE. Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In simpler terms, it measures the profitability of a company in relation to shareholder's equity. This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. ROE can be calculated by using the formula: Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity So, based on the above formula, the ROE for UMediC Group Berhad is: 11% = RM8.5m ÷ RM77m (Based on the trailing twelve months to January 2025). The 'return' is the amount earned after tax over the last twelve months. Another way to think of that is that for every MYR1 worth of equity, the company was able to earn MYR0.11 in profit. Check out our latest analysis for UMediC Group Berhad So far, we've learned that ROE is a measure of a company's profitability. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company's earnings growth potential. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics. On the face of it, UMediC Group Berhad's ROE is not much to talk about. However, given that the company's ROE is similar to the average industry ROE of 10%, we may spare it some thought. Even so, UMediC Group Berhad has shown a fairly decent growth in its net income which grew at a rate of 20%. Given the slightly low ROE, it is likely that there could be some other aspects that are driving this growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio. We then performed a comparison between UMediC Group Berhad's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 19% in the same 5-year period. Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Has the market priced in the future outlook for UMC? You can find out in our latest intrinsic value infographic research report. UMediC Group Berhad doesn't pay any regular dividends, meaning that all of its profits are being reinvested in the business, which explains the fair bit of earnings growth the company has seen. In total, it does look like UMediC Group Berhad has some positive aspects to its business. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth. On studying current analyst estimates, we found that analysts expect the company to continue its recent growth streak. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more. 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.
