Yahoo Finance Bright Packaging Industry Berhad (KLSE:BRIGHT) Is Doing The Right Things To Multiply Its Share Price
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 Bright Packaging Industry Berhad (KLSE:BRIGHT) and its trend of ROCE, we really liked what we saw.
What Is Return On Capital Employed (ROCE)?
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 Bright Packaging Industry Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.015 = RM1.9m ÷ (RM131m - RM6.8m) (Based on the trailing twelve months to November 2023).
Therefore, Bright Packaging Industry Berhad has an ROCE of 1.5%. In absolute terms, that's a low return and it also under-performs the Packaging industry average of 9.4%.
Check out our latest analysis for Bright Packaging Industry Berhad
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating Bright Packaging Industry Berhad's past further, check out this free graph covering Bright Packaging Industry Berhad's past earnings, revenue and cash flow.
So How Is Bright Packaging Industry Berhad's ROCE Trending?
Bright Packaging Industry Berhad has broken into the black (profitability) and we're sure it's a sight for sore eyes. While the business was unprofitable in the past, it's now turned things around and is earning 1.5% on its capital. 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. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.
The Bottom Line On Bright Packaging Industry Berhad's ROCE
As discussed above, Bright Packaging Industry Berhad appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. Since the total return from the stock has been almost flat over the last five years, there might be an opportunity here if the valuation looks good. That being the case, research into the company's current valuation metrics and future prospects seems fitting.
On a final note, we've found 1 warning sign for Bright Packaging Industry Berhad that we think you should be aware of.
While Bright Packaging Industry 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.
