If you’re looking for a multi-bagger, there’s a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of PWF Corporation Bhd (KLSE:PWF) looks great, so lets see what the trend can tell us.
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 PWF Corporation Bhd:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.20 = RM89m ÷ (RM563m – RM122m) (Based on the trailing twelve months to December 2023).
So, PWF Corporation Bhd has an ROCE of 20%. That’s a fantastic return and not only that, it outpaces the average of 7.3% earned by companies in a similar industry.
See our latest analysis for PWF Corporation Bhd
Historical performance is a great place to start when researching a stock so above you can see the gauge for PWF Corporation Bhd’s ROCE against it’s prior returns. If you’d like to look at how PWF Corporation Bhd has performed in the past in other metrics, you can view this free graph of PWF Corporation Bhd’s past earnings, revenue and cash flow.
What Can We Tell From PWF Corporation Bhd’s ROCE Trend?
We like the trends that we’re seeing from PWF Corporation Bhd. The data shows that returns on capital have increased substantially over the last five years to 20%. Basically the business is earning more per dollar of capital invested and in addition to that, 30% more capital is being employed now too. The increasing returns on a growing amount of capital is common amongst multi-baggers and that’s why we’re impressed.
What We Can Learn From PWF Corporation Bhd’s ROCE
To sum it up, PWF Corporation Bhd has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 90% return over the last five years. In light of that, we think it’s worth looking further into this stock because if PWF Corporation Bhd can keep these trends up, it could have a bright future ahead.
Like most companies, PWF Corporation Bhd does come with some risks, and we’ve found 3 warning signs that you should be aware of.
PWF Corporation Bhd is not the only stock earning high returns. If you’d like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.
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.
