If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. And in light of that, the trends we're seeing at Oriental Food Industries Holdings Berhad's (KLSE:OFI) look very promising so lets take a look.

Return On Capital Employed (ROCE): What Is It?

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. The formula for this calculation on Oriental Food Industries Holdings Berhad is:

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

0.22 = RM62m ÷ (RM330m - RM47m) (Based on the trailing twelve months to June 2024).

Therefore, Oriental Food Industries Holdings Berhad has an ROCE of 22%. In absolute terms that's a great return and it's even better than the Food industry average of 8.9%.

View our latest analysis for Oriental Food Industries Holdings 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'd like to look at how Oriental Food Industries Holdings Berhad has performed in the past in other metrics, you can view this free graph of Oriental Food Industries Holdings Berhad's past earnings, revenue and cash flow.

What The Trend Of ROCE Can Tell Us

Oriental Food Industries Holdings Berhad is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 22%. Basically the business is earning more per dollar of capital invested and in addition to that, 33% more capital is being employed now too. So we're very much inspired by what we're seeing at Oriental Food Industries Holdings Berhad thanks to its ability to profitably reinvest capital.

In Conclusion...

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Oriental Food Industries Holdings Berhad has. And a remarkable 220% total return over the last five years tells us that investors are expecting more good things to come in the future. Therefore, we think it would be worth your time to check if these trends are going to continue.

On a separate note, we've found 1 warning sign for Oriental Food Industries Holdings Berhad you'll probably want to know about.

Oriental Food Industries Holdings Berhad is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.