If you want to find stocks with the potential for long-term growth, what fundamental trends should you look for? In particular, I'd like to look at two things.First, grow return The first is capital employed (ROCE) and the second is the company's capital growth. amount of capital employed. This basically means that the company has a profitable endeavor that can be continually reinvested, which is the nature of compound interest.So, in the meantime Mr. DIY Group (M) Berhad (KLSE:MRDIY) currently has a high ROCE. Let's take a look at what we can learn from how earnings have changed.
About Return on Capital Employed (ROCE)
For those who don't know, ROCE is a measure of a company's annual pre-tax profit (return) on the capital employed in the business. The analyst uses the following formula to calculate DIY Group (M) Berhad's earnings.
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.28 = RM815m ÷ (RM3.6b – RM641m) (Based on the previous 12 months to December 2023).
So, Mr DIY Group (M) Berhad's ROCE is 28%. In absolute terms, this is a significant gain, even better than the specialty retail industry average of 14%.
Check out our latest analysis for Mr DIY Group (M) Berhad.
Above you can see how Mr DIY Group (M) Berhad's current ROCE compares to its previous return on capital, but history can only tell us so much. If you're interested, take a look at our analyst forecasts. free Mr DIY Group (M) Berhad Analyst Report.
What are the return trends like?
When we looked at the ROCE trend at Mr DIY Group (M) Berhad, we weren't very confident. Historically, return on equity has been higher, at 40%, but has declined over the past five years. However, DIY Group (M) Berhad appears to be reinvesting for long-term growth. That's because, although capital employed has increased, the company's revenue hasn't changed much over the past 12 months. It's worth keeping an eye on the company's earnings going forward to see if these investments ultimately contribute to its bottom line.
Our thoughts on Mr DIY Group (M) Berhad's ROCE
In summary, we are somewhat encouraged by Mister DIY Group (M) Berhad's reinvestment in its business, although we acknowledge that its earnings are shrinking. Over the past three years, the stock has given away 44% of his value, so the market doesn't have much hope for these trends to strengthen anytime soon. Overall, the inherent tendency is not unique to multibaggers, so we think if that's what you're looking for, you might have better luck elsewhere.
If you want to know about the risks faced by Mr DIY Group (M) Berhad, here's what we discovered. 1 warning sign What you need to know.
If you want to find more stocks with high returns, check this out. free This is a list of stocks with strong balance sheets and high return on equity.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.