If you’re looking for a multi-bagger, there are a few things to watch out for. Ideally, a business will show two trends; first growth come back on capital employed (ROCE) and on the other hand, growth amount capital employed. This shows us that it is a compounding machine, capable of continuously reinvesting its profits back into the business and generating higher returns. With this in mind, the ROCE of Frontken Corporation Berhad (KLSE:FRONTKN) looks great, so let’s see what the trend can tell us.
Return on capital employed (ROCE): what is it?
Just to clarify if you’re not sure, ROCE is a measure of the pre-tax income (as a percentage) that a business earns on the capital invested in its business. Analysts use this formula to calculate it for Frontken Corporation Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.29 = RM171m ÷ (RM766m – RM178m) (Based on the last twelve months to September 2022).
Therefore, Frontken Corporation Berhad has a ROCE of 29%. In absolute terms, this is an excellent performance and even better than the business services industry average of 8.2%.
Above, you can see how Frontken Corporation Berhad’s current ROCE compares to its past returns on capital, but you can’t say anything about the past. If you’re interested, you can check out analyst forecasts in our free analyst forecast report for the company.
So, what is the ROCE trend of Frontken Corporation Berhad?
We love the trends we see from Frontken Corporation Berhad. Data shows that capital returns have increased significantly over the past five years to 29%. The amount of capital employed also increased by 85%. So we’re very inspired by what we’re seeing at Frontken Corporation Berhad with its ability to reinvest capital profitably.
In summary, Frontken Corporation Berhad has proven that it can reinvest in the business and generate higher returns on that capital employed, which is great. And since the stock has performed exceptionally well over the past five years, these trends are taken into account by investors. Therefore, we think it would be worth checking whether these trends will continue.
Before drawing any conclusions, we need to know what value we get for the current stock price. This is where you can view our FREE Intrinsic Value Estimate which compares the stock price and the estimated value.
High yields are a key ingredient to strong performance, so check out our free list ofstocks generating high returns on equity with strong balance sheets.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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