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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in United Plantations Berhad's (KLSE:UTDPLT) returns on capital, so let's have a look.
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Understanding Return On Capital Employed (ROCE)
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for United Plantations Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.29 = RM936m ÷ (RM3.4b - RM195m) (Based on the trailing twelve months to March 2025).
Therefore, United Plantations Berhad has an ROCE of 29%. In absolute terms that's a great return and it's even better than the Food industry average of 9.1%.
See our latest analysis for United Plantations Berhad
Above you can see how the current ROCE for United Plantations Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering United Plantations Berhad for free.
What Can We Tell From United Plantations Berhad's ROCE Trend?
United Plantations Berhad is showing promise given that its ROCE is trending up and to the right. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 127% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.
Our Take On United Plantations Berhad's ROCE
As discussed above, United Plantations Berhad appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the stock has returned a staggering 260% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.