If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So, when we ran our eye over OpenSys (M) Berhad's (KLSE:OPENSYS) trend of ROCE, we liked what we saw.

What Is 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 OpenSys (M) Berhad is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.17 = RM18m ÷ (RM131m - RM26m) (Based on the trailing twelve months to June 2024).

Therefore, OpenSys (M) Berhad has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 8.9% generated by the Tech industry.

Check out our latest analysis for OpenSys (M) Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for OpenSys (M) 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 OpenSys (M) Berhad.

What The Trend Of ROCE Can Tell Us

While the current returns on capital are decent, they haven't changed much. The company has employed 36% more capital in the last five years, and the returns on that capital have remained stable at 17%. 17% is a pretty standard return, and it provides some comfort knowing that OpenSys (M) Berhad has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.

The Bottom Line On OpenSys (M) Berhad's ROCE

To sum it up, OpenSys (M) Berhad has simply been reinvesting capital steadily, at those decent rates of return. And the stock has done incredibly well with a 101% return over the last five years, so long term investors are no doubt ecstatic with that result. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.

One more thing: We've identified 3 warning signs with OpenSys (M) Berhad (at least 1 which is a bit unpleasant) , and understanding them would certainly be useful.