Returns At Jaya Tiasa Holdings Berhad (KLSE:JTIASA) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. 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 Jaya Tiasa Holdings Berhad (KLSE:JTIASA) and its trend of ROCE, we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Jaya Tiasa Holdings Berhad, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.13 = RM238m ÷ (RM2.0b - RM188m) (Based on the trailing twelve months to September 2022).

Therefore, Jaya Tiasa Holdings Berhad has an ROCE of 13%. In absolute terms, that's a satisfactory return, but compared to the Forestry industry average of 6.4% it's much better.

Check out our latest analysis for Jaya Tiasa Holdings Berhad

Above you can see how the current ROCE for Jaya Tiasa Holdings 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 report on analyst forecasts for the company.

So How Is Jaya Tiasa Holdings Berhad's ROCE Trending?

We're pretty happy with how the ROCE has been trending at Jaya Tiasa Holdings Berhad. The figures show that over the last five years, returns on capital have grown by 108%. The company is now earning RM0.1 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 30% less than it was five years ago, which can be indicative of a business that's improving its efficiency. Jaya Tiasa Holdings Berhad may be selling some assets so it's worth investigating if the business has plans for future investments to increase returns further still.

What We Can Learn From Jaya Tiasa Holdings Berhad's ROCE

In the end, Jaya Tiasa Holdings Berhad has proven it's capital allocation skills are good with those higher returns from less amount of capital. Given the stock has declined 38% in the last five years, this could be a good investment if the valuation and other metrics are also appealing. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about Jaya Tiasa Holdings Berhad, we've spotted 2 warning signs, and 1 of them is potentially serious.

While Jaya Tiasa Holdings 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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