Yahoo Finance First Resources (SGX:EB5) Hasn't Managed To Accelerate Its Returns
If you're looking for a multi-bagger, there's a few things to 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at First Resources (SGX:EB5) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
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. The formula for this calculation on First Resources is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.13 = US$198m ÷ (US$1.8b - US$212m) (Based on the trailing twelve months to December 2023).
Thus, First Resources has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 7.6% generated by the Food industry.
View our latest analysis for First Resources
In the above chart we have measured First Resources' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for First Resources .
The Trend Of ROCE
There hasn't been much to report for First Resources' returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if First Resources doesn't end up being a multi-bagger in a few years time. With fewer investment opportunities, it makes sense that First Resources has been paying out a decent 56% of its earnings to shareholders. Unless businesses have highly compelling growth opportunities, they'll typically return some money to shareholders.
In Conclusion...
We can conclude that in regards to First Resources' returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 11% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.
One more thing, we've spotted 2 warning signs facing First Resources that you might find interesting.
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.
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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.
