Yahoo Finance BP Plastics Holding Bhd (KLSE:BPPLAS) Has Some Way To Go To Become A Multi-Bagger
What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So, when we ran our eye over BP Plastics Holding Bhd's (KLSE:BPPLAS) trend of ROCE, we liked what we saw.
Return On Capital Employed (ROCE): What Is It?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on BP Plastics Holding Bhd is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.14 = RM38m ÷ (RM349m - RM71m) (Based on the trailing twelve months to December 2023).
Thus, BP Plastics Holding Bhd has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Packaging industry average of 8.9% it's much better.
Check out our latest analysis for BP Plastics Holding Bhd
Above you can see how the current ROCE for BP Plastics Holding Bhd compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering BP Plastics Holding Bhd for free.
So How Is BP Plastics Holding Bhd's ROCE Trending?
While the returns on capital are good, they haven't moved much. Over the past five years, ROCE has remained relatively flat at around 14% and the business has deployed 45% more capital into its operations. 14% is a pretty standard return, and it provides some comfort knowing that BP Plastics Holding Bhd has consistently earned this amount. Stable returns in this ballpark can be unexciting, but if they can be maintained over the long run, they often provide nice rewards to shareholders.
The Bottom Line
The main thing to remember is that BP Plastics Holding Bhd has proven its ability to continually reinvest at respectable rates of return. On top of that, the stock has rewarded shareholders with a remarkable 182% return to those who've held over the last five years. So while investors seem to be recognizing these promising trends, we still believe the stock deserves further research.
Like most companies, BP Plastics Holding Bhd does come with some risks, and we've found 2 warning signs that you should be aware of.
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.
