Yahoo Finance Returns On Capital At Chin Teck Plantations Berhad (KLSE:CHINTEK) Have Hit The Brakes
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 Chin Teck Plantations Berhad (KLSE:CHINTEK) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
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. The formula for this calculation on Chin Teck Plantations Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.055 = RM50m ÷ (RM937m - RM18m) (Based on the trailing twelve months to November 2023).
Thus, Chin Teck Plantations Berhad has an ROCE of 5.5%. On its own, that's a low figure but it's around the 5.9% average generated by the Food industry.
Check out our latest analysis for Chin Teck Plantations Berhad
Above you can see how the current ROCE for Chin Teck Plantations Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Chin Teck Plantations Berhad .
What Does the ROCE Trend For Chin Teck Plantations Berhad Tell Us?
In terms of Chin Teck Plantations Berhad's historical ROCE trend, it doesn't exactly demand attention. The company has consistently earned 5.5% for the last five years, and the capital employed within the business has risen 35% in that time. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.
In Conclusion...
As we've seen above, Chin Teck Plantations Berhad's returns on capital haven't increased but it is reinvesting in the business. And with the stock having returned a mere 28% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.
On a separate note, we've found 2 warning signs for Chin Teck Plantations Berhad you'll probably want to know about.
For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high 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.
