Yahoo Finance We Like These Underlying Return On Capital Trends At Seacera Group Berhad (KLSE:SEACERA)
If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. So when we looked at Seacera Group Berhad (KLSE:SEACERA) and its trend of ROCE, we really liked what we saw.
What Is 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 Seacera Group Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.0091 = RM7.4m ÷ (RM844m - RM37m) (Based on the trailing twelve months to September 2023).
So, Seacera Group Berhad has an ROCE of 0.9%. In absolute terms, that's a low return and it also under-performs the Building industry average of 11%.
View our latest analysis for Seacera Group Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Seacera Group Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings, revenue and cash flow of Seacera Group Berhad, check out these free graphs here.
What Does the ROCE Trend For Seacera Group Berhad Tell Us?
We're delighted to see that Seacera Group Berhad is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 0.9%, which is always encouraging. While returns have increased, the amount of capital employed by Seacera Group Berhad has remained flat over the period. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. Because in the end, a business can only get so efficient.
The Bottom Line
In summary, we're delighted to see that Seacera Group Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 36% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
If you want to continue researching Seacera Group Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.
While Seacera Group 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.
