Yahoo Finance Returns At Bright Packaging Industry Berhad (KLSE:BRIGHT) Are On The Way Up
Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher 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.
Understanding 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. To calculate this metric for Bright Packaging Industry Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.024 = RM3.0m ÷ (RM134m - RM9.8m) (Based on the trailing twelve months to August 2023).
Therefore, Bright Packaging Industry Berhad has an ROCE of 2.4%. Ultimately, that's a low return and it under-performs the Packaging industry average of 11%.
Check out our latest analysis for Bright Packaging Industry Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Bright Packaging Industry Berhad's ROCE against it's prior returns. If you'd like to look at how Bright Packaging Industry Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.
How Are Returns Trending?
Bright Packaging Industry Berhad has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 2.4%, 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. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.
The Key Takeaway
To bring it all together, Bright Packaging Industry Berhad has done well to increase the returns it's generating from its capital employed. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 19% to shareholders. So with that in mind, we think the stock deserves further research.
On a final note, we've found 2 warning signs for Bright Packaging Industry Berhad that we think you should be aware of.
While Bright Packaging Industry Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.
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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.
