Yahoo Finance Return Trends At Boustead Singapore (SGX:F9D) Aren't Appealing
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. However, after investigating Boustead Singapore (SGX:F9D), we don't think it's current trends fit the mold of a multi-bagger.
Understanding Return On Capital Employed (ROCE)
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. Analysts use this formula to calculate it for Boustead Singapore:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.094 = S$70m ÷ (S$1.2b - S$480m) (Based on the trailing twelve months to September 2023).
Thus, Boustead Singapore has an ROCE of 9.4%. On its own, that's a low figure but it's around the 8.0% average generated by the Construction industry.
View our latest analysis for Boustead Singapore
In the above chart we have measured Boustead Singapore's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Boustead Singapore .
How Are Returns Trending?
The returns on capital haven't changed much for Boustead Singapore in recent years. The company has consistently earned 9.4% for the last five years, and the capital employed within the business has risen 36% in that time. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
The Key Takeaway
In conclusion, Boustead Singapore has been investing more capital into the business, but returns on that capital haven't increased. Since the stock has gained an impressive 52% over the last five years, investors must think there's better things to come. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.
One more thing to note, we've identified 1 warning sign with Boustead Singapore and understanding it should be part of your investment process.
While Boustead Singapore isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
