Yahoo Finance Many Would Be Envious Of Lee Swee Kiat Group Berhad's (KLSE:LEESK) Excellent Returns On Capital
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. With that in mind, the ROCE of Lee Swee Kiat Group Berhad (KLSE:LEESK) looks attractive right now, so lets see what the trend of returns can tell us.
Return On Capital Employed (ROCE): What Is It?
For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Lee Swee Kiat Group Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.20 = RM17m ÷ (RM118m - RM32m) (Based on the trailing twelve months to December 2023).
So, Lee Swee Kiat Group Berhad has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Consumer Durables industry average of 11%.
View our latest analysis for Lee Swee Kiat Group Berhad
Above you can see how the current ROCE for Lee Swee Kiat Group Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Lee Swee Kiat Group Berhad .
The Trend Of ROCE
In terms of Lee Swee Kiat Group Berhad's history of ROCE, it's quite impressive. The company has employed 44% more capital in the last five years, and the returns on that capital have remained stable at 20%. Now considering ROCE is an attractive 20%, this combination is actually pretty appealing because it means the business can consistently put money to work and generate these high returns. If Lee Swee Kiat Group Berhad can keep this up, we'd be very optimistic about its future.
The Bottom Line
In short, we'd argue Lee Swee Kiat Group Berhad has the makings of a multi-bagger since its been able to compound its capital at very profitable rates of return. Therefore it's no surprise that shareholders have earned a respectable 45% return if they held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
On a separate note, we've found 3 warning signs for Lee Swee Kiat Group Berhad you'll probably want to know about.
Lee Swee Kiat Group Berhad 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.
