If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So on that note, Sarawak Consolidated Industries Berhad (KLSE:SCIB) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Sarawak Consolidated Industries Berhad:

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

0.014 = RM2.4m ÷ (RM252m - RM77m) (Based on the trailing twelve months to September 2023).

So, Sarawak Consolidated Industries Berhad has an ROCE of 1.4%. In absolute terms, that's a low return and it also under-performs the Building industry average of 8.4%.

View our latest analysis for Sarawak Consolidated Industries Berhad

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

What Can We Tell From Sarawak Consolidated Industries Berhad's ROCE Trend?

The fact that Sarawak Consolidated Industries Berhad is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making five years ago but is is now generating 1.4% on its capital. Not only that, but the company is utilizing 173% more capital than before, but that's to be expected from a company trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In Conclusion...

Overall, Sarawak Consolidated Industries Berhad gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And a remarkable 472% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Sarawak Consolidated Industries Berhad can keep these trends up, it could have a bright future ahead.

On a final note, we found 3 warning signs for Sarawak Consolidated Industries Berhad (2 can't be ignored) you should be aware of.

While Sarawak Consolidated Industries Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.