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Explore EITA Resources Berhad's Fair Values from the Community and select yours
To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at EITA Resources Berhad (KLSE:EITA) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.
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. Analysts use this formula to calculate it for EITA Resources Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.065 = RM17m ÷ (RM404m - RM144m) (Based on the trailing twelve months to March 2025).
So, EITA Resources Berhad has an ROCE of 6.5%. On its own, that's a low figure but it's around the 7.7% average generated by the Machinery industry.
Check out our latest analysis for EITA Resources Berhad
In the above chart we have measured EITA Resources Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering EITA Resources Berhad for free.
When we looked at the ROCE trend at EITA Resources Berhad, we didn't gain much confidence. Around five years ago the returns on capital were 18%, but since then they've fallen to 6.5%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.
In summary, EITA Resources Berhad is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Unsurprisingly, the stock has only gained 14% over the last five years, which potentially indicates that investors are accounting for this going forward. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
