Latest news with #RexIndustryBerhad
Yahoo
03-06-2025
- Business
- Yahoo
Solid Earnings May Not Tell The Whole Story For Rex Industry Berhad (KLSE:REX)
Rex Industry Berhad's (KLSE:REX) robust recent earnings didn't do much to move the stock. We think this is due to investors looking beyond the statutory profits and being concerned with what they see. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. In high finance, the key ratio used to measure how well a company converts reported profits into free cash flow (FCF) is the accrual ratio (from cashflow). The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. You could think of the accrual ratio from cashflow as the 'non-FCF profit ratio'. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. Notably, there is some academic evidence that suggests that a high accrual ratio is a bad sign for near-term profits, generally speaking. Rex Industry Berhad has an accrual ratio of 0.26 for the year to March 2025. Unfortunately, that means its free cash flow fell significantly short of its reported profits. Even though it reported a profit of RM6.33m, a look at free cash flow indicates it actually burnt through RM19m in the last year. It's worth noting that Rex Industry Berhad generated positive FCF of RM4.1m a year ago, so at least they've done it in the past. The good news for shareholders is that Rex Industry Berhad's accrual ratio was much better last year, so this year's poor reading might simply be a case of a short term mismatch between profit and FCF. Shareholders should look for improved cashflow relative to profit in the current year, if that is indeed the case. Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Rex Industry Berhad. Rex Industry Berhad didn't convert much of its profit to free cash flow in the last year, which some investors may consider rather suboptimal. Therefore, it seems possible to us that Rex Industry Berhad's true underlying earnings power is actually less than its statutory profit. On the bright side, the company showed enough improvement to book a profit this year, after losing money last year. The goal of this article has been to assess how well we can rely on the statutory earnings to reflect the company's potential, but there is plenty more to consider. So while earnings quality is important, it's equally important to consider the risks facing Rex Industry Berhad at this point in time. To that end, you should learn about the 3 warning signs we've spotted with Rex Industry Berhad (including 1 which is concerning). Today we've zoomed in on a single data point to better understand the nature of Rex Industry Berhad's profit. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. 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
19-02-2025
- Business
- Yahoo
Rex Industry Berhad (KLSE:REX) Is Experiencing Growth In Returns On Capital
There are a few key trends to look for if we want to identify the next multi-bagger. 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. With that in mind, we've noticed some promising trends at Rex Industry Berhad (KLSE:REX) so let's look a bit deeper. 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. To calculate this metric for Rex Industry Berhad, this is the formula: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.076 = RM8.7m ÷ (RM162m - RM49m) (Based on the trailing twelve months to December 2024). Thus, Rex Industry Berhad has an ROCE of 7.6%. 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 Rex Industry Berhad Historical performance is a great place to start when researching a stock so above you can see the gauge for Rex Industry Berhad'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 Rex Industry Berhad. We're delighted to see that Rex Industry Berhad is reaping rewards from its investments and has now broken into profitability. The company now earns 7.6% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Rex Industry Berhad has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. Because in the end, a business can only get so efficient. To sum it up, Rex Industry Berhad is collecting higher returns from the same amount of capital, and that's impressive. And since the stock has fallen 45% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation. One final note, you should learn about the 2 warning signs we've spotted with Rex Industry Berhad (including 1 which is concerning) . While Rex Industry 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.
