There are a few key trends to look for if we want to identify the next multi-bagger. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. So on that note, CSC Steel Holdings Berhad (KLSE:CSCSTEL) looks quite promising in regards to its trends of return on capital.
Return On Capital Employed (ROCE): What Is It?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for CSC Steel Holdings Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.035 = RM32m ÷ (RM969m - RM53m) (Based on the trailing twelve months to December 2024).
Therefore, CSC Steel Holdings Berhad has an ROCE of 3.5%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 5.8%.
View our latest analysis for CSC Steel Holdings Berhad
In the above chart we have measured CSC Steel Holdings Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for CSC Steel Holdings Berhad .
What Does the ROCE Trend For CSC Steel Holdings Berhad Tell Us?
While there are companies with higher returns on capital out there, we still find the trend at CSC Steel Holdings Berhad promising. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 99% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.
What We Can Learn From CSC Steel Holdings Berhad's ROCE
In summary, we're delighted to see that CSC Steel Holdings Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And a remarkable 151% total return over the last five years tells us that investors are expecting more good things to come in the future. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.