Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. With that in mind, the ROCE of RGB International Bhd (KLSE:RGB) looks great, so lets see what the trend can tell us.
Return On Capital Employed (ROCE): What Is It?
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 RGB International Bhd is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.24 = RM119m ÷ (RM683m - RM185m) (Based on the trailing twelve months to December 2024).
So, RGB International Bhd has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 7.9% earned by companies in a similar industry.
See our latest analysis for RGB International Bhd
Above you can see how the current ROCE for RGB International Bhd 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 RGB International Bhd .
What Does the ROCE Trend For RGB International Bhd Tell Us?
Investors would be pleased with what's happening at RGB International Bhd. The data shows that returns on capital have increased substantially over the last five years to 24%. The amount of capital employed has increased too, by 52%. So we're very much inspired by what we're seeing at RGB International Bhd thanks to its ability to profitably reinvest capital.
What We Can Learn From RGB International Bhd's ROCE
In summary, it's great to see that RGB International Bhd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.
One more thing to note, we've identified 2 warning signs with RGB International Bhd and understanding them should be part of your investment process.