Shareholders Would Enjoy A Repeat Of United Plantations Berhad's (KLSE:UTDPLT) Recent Growth In Returns

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of United Plantations Berhad (KLSE:UTDPLT) we really liked what we saw.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on United Plantations Berhad is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.26 = RM833m ÷ (RM3.6b - RM370m) (Based on the trailing twelve months to September 2022).

Therefore, United Plantations Berhad has an ROCE of 26%. In absolute terms that's a great return and it's even better than the Food industry average of 11%.

View our latest analysis for United Plantations Berhad

roce

Historical performance is a great place to start when researching a stock so above you can see the gauge for United Plantations Berhad's ROCE against it's prior returns. If you'd like to look at how United Plantations Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

The Trend Of ROCE

United Plantations Berhad is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 26%. Basically the business is earning more per dollar of capital invested and in addition to that, 24% more capital is being employed now too. So we're very much inspired by what we're seeing at United Plantations Berhad thanks to its ability to profitably reinvest capital.

The Bottom Line On United Plantations Berhad's ROCE

To sum it up, United Plantations Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 47% return over the last five years. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to continue researching United Plantations Berhad, you might be interested to know about the 1 warning sign that our analysis has discovered.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets here.

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.

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