There are a few key trends to look for if we want to identify the next 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. However, after briefly looking over the numbers, we don't think Astral Asia Berhad (KLSE:AASIA) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

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. Analysts use this formula to calculate it for Astral Asia Berhad:

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

0.0066 = RM2.3m ÷ (RM365m - RM20m) (Based on the trailing twelve months to June 2022).

Therefore, Astral Asia Berhad has an ROCE of 0.7%. Ultimately, that's a low return and it under-performs the Food industry average of 12%.

Check out our latest analysis for Astral Asia Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Astral Asia Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Astral Asia Berhad, check out these free graphs here.

So How Is Astral Asia Berhad's ROCE Trending?

Over the past five years, Astral Asia Berhad's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Astral Asia Berhad to be a multi-bagger going forward.

In Conclusion...

We can conclude that in regards to Astral Asia Berhad's returns on capital employed and the trends, there isn't much change to report on. And investors appear hesitant that the trends will pick up because the stock has fallen 49% in the last five years. Therefore based on the analysis done in this article, we don't think Astral Asia Berhad has the makings of a multi-bagger.

One more thing: We've identified 4 warning signs with Astral Asia Berhad (at least 1 which is a bit concerning) , and understanding them would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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