If you want to find stocks with long-term growth potential, what trends should you look for? return Return on invested capital (ROCE) is increasing, and secondly, base 100% of invested capital. This indicates a company that is reinvesting its profits at a growing rate of return. With this in mind, United Plantations (KLSE:UTDPLT) looks great, so let’s see what the trends tell us.
What is Return on Invested Capital (ROCE)?
For those unsure of what ROCE is, it measures the amount of pre-tax profit a company is able to generate from the capital employed in its business, and the formula to calculate this metric for United Plantations Berhad is:
Return on Invested Capital = Earnings Before Interest and Taxes (EBIT) ÷ (Total Assets – Current Liabilities)
0.29 = RM925m ÷ (RM34b – RM175m) (Based on the trailing 12 months ending March 2024).
therefore, United Plantations Berhad has an ROCE of 29%. Not only is this an excellent rate of return, but it’s also higher than the average of 7.0% earned by companies in a similar industry.
Check out our latest analysis for United Plantations Berhad
In the chart above we compare United Plantations Berhad’s historical ROCE with its past performance, but the future is arguably more important. If you like, you can check out forecasts made by the analysts covering United Plantations Berhad. free.
ROCE Trends
United Plantations Berhad’s future looks promising, as its ROCE is on an upward trend. Looking at the numbers, over the past five years, ROCE has increased by 100% with roughly the same capital investment. Essentially, the business is generating higher returns from the same capital, which is evidence of the company’s increasing efficiency. From that perspective, things are looking good, so it’s worth looking into what management has to say about its future growth plans.
Conclusion
In summary, United Plantations Berhad has been successful in generating increased returns on invested capital. Investors appear to be aware of this change, as the company’s stock has returned an impressive 175% return to shareholders over the past five years. That said, we still believe the company has strong fundamentals and deserves further due diligence.
Like most businesses, there are risks involved with United Plantations Berhad. 1. Warning Signs Something you should know.
If you want to see other companies making high profits, free Here is a list of companies with solid balance sheets and strong earnings.
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This article by Simply Wall St is general in nature. We use only unbiased methodologies to provide commentary based on historical data and analyst forecasts, and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks, and does not take into account your objectives, or your financial situation. We seek to provide long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
