Yahoo Finance Media Prima Berhad (KLSE:MEDIA) Might Have The Makings Of A Multi-Bagger
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. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Media Prima Berhad (KLSE:MEDIA) and its trend of ROCE, we really liked what we saw.
Return On Capital Employed (ROCE): What Is It?
Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. Analysts use this formula to calculate it for Media Prima Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.086 = RM80m ÷ (RM1.4b - RM478m) (Based on the trailing twelve months to June 2023).
Therefore, Media Prima Berhad has an ROCE of 8.6%. In absolute terms, that's a low return but it's around the Media industry average of 7.6%.
View our latest analysis for Media Prima Berhad
Above you can see how the current ROCE for Media Prima Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Media Prima Berhad .
So How Is Media Prima Berhad's ROCE Trending?
We're delighted to see that Media Prima Berhad is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 8.6%, which is always encouraging. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. Because in the end, a business can only get so efficient.
What We Can Learn From Media Prima Berhad's ROCE
To bring it all together, Media Prima Berhad has done well to increase the returns it's generating from its capital employed. Considering the stock has delivered 3.1% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.
Media Prima Berhad does come with some risks though, we found 2 warning signs in our investment analysis, and 1 of those doesn't sit too well with us...
While Media Prima Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.
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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.
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