Yahoo Finance Wong Engineering Corporation Berhad's (KLSE:WONG) Returns On Capital Are Heading Higher
What trends should we look for it we want to identify stocks that can multiply in value over the long term? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in Wong Engineering Corporation Berhad's (KLSE:WONG) returns on capital, so let's have a look.
Understanding Return On Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. To calculate this metric for Wong Engineering Corporation Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.16 = RM17m ÷ (RM117m - RM11m) (Based on the trailing twelve months to April 2024).
Therefore, Wong Engineering Corporation Berhad has an ROCE of 16%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 8.4% it's much better.
View our latest analysis for Wong Engineering Corporation Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Wong Engineering Corporation Berhad's ROCE against it's prior returns. If you'd like to look at how Wong Engineering Corporation Berhad has performed in the past in other metrics, you can view this free graph of Wong Engineering Corporation Berhad's past earnings, revenue and cash flow.
So How Is Wong Engineering Corporation Berhad's ROCE Trending?
Wong Engineering Corporation Berhad is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 16%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 26%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
What We Can Learn From Wong Engineering Corporation Berhad's ROCE
All in all, it's terrific to see that Wong Engineering Corporation Berhad is reaping the rewards from prior investments and is growing its capital base. And with a respectable 70% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.
One more thing: We've identified 2 warning signs with Wong Engineering Corporation Berhad (at least 1 which is concerning) , and understanding these would certainly be useful.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
