If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. Although, when we looked at Unisem (M) Berhad (KLSE:UNISEM), it didn't seem to tick all of these boxes.
Understanding Return On Capital Employed (ROCE)
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 Unisem (M) Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.032 = RM77m ÷ (RM3.0b - RM564m) (Based on the trailing twelve months to March 2025).
Thus, Unisem (M) Berhad has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Semiconductor industry average of 6.2%.
View our latest analysis for Unisem (M) Berhad
Above you can see how the current ROCE for Unisem (M) 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 Unisem (M) Berhad .
So How Is Unisem (M) Berhad's ROCE Trending?
In terms of Unisem (M) Berhad's historical ROCE movements, the trend isn't fantastic. To be more specific, ROCE has fallen from 6.0% over the last five years. 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.
The Bottom Line On Unisem (M) Berhad's ROCE
In summary, despite lower returns in the short term, we're encouraged to see that Unisem (M) Berhad is reinvesting for growth and has higher sales as a result. And long term investors must be optimistic going forward because the stock has returned a huge 165% to shareholders in the last five years. So while the underlying trends could already be accounted for by investors, we still think this stock is worth looking into further.