If you want to find stocks with long-term growth potential, what underlying trends should you look for? Ideally, you’ll see two trends in a business.grow first return One is capital employed (ROCE) and the second is increasing. amount of capital employed. Simply put, this type of business is a compound interest machine, meaning you are continually reinvesting your earnings at an ever-higher rate of return. With that in mind, we’ve noticed some promising trends. Nova Wellness Group Berhad (KLSE:NOVA) So let’s take a closer look.
What is return on capital employed (ROCE)?
For those who don’t know, ROCE is a measure of a company’s annual pre-tax profit (return) on the capital employed in the business. The analyst uses the following formula to calculate the numbers for Nova Wellness Group Berhad.
Return on Capital Employed = Earnings before interest and tax (EBIT) ÷ (Total assets – Current liabilities)
0.14 = RM16m ÷ (RM117m – RM3.1m) (Based on the previous 12 months to September 2023).
therefore, Nova Wellness Group Berhad’s ROCE is 14%. While this is a standard return in itself, it is much better than the 11% generated by the personal products industry.
Check out our latest analysis for Nova Wellness Group Berhad.
In the chart above, we’ve measured Nova Wellness Group Berhad’s previous ROCE against its previous performance, but the future is probably more important. If you’re interested, take a look at our analyst forecasts. free A report on analyst forecasts for a company.
What ROCE trends tell us
Investors will be happy with what’s happening with Nova Wellness Group Berhad. Over the past five years, the return on capital employed has increased significantly to his 14%. It is worth noting that the company has virtually increased its return per dollar of capital employed, and the amount of capital has also increased by 43%. That’s why we’re very inspired by what we’re seeing at Nova Wellness Group Berhad, thanks to its ability to reinvest capital profitably.
conclusion
Overall, it’s great to see Nova Wellness Group Berhad benefiting from previous investments and growing its capital base. Given that the company’s stock has returned 35% to shareholders over the past five years, it might be reasonable to think that investors haven’t fully recognized the promising trends yet. So, with that in mind, we think this stock deserves further research.
Finally, we discovered that 2 warning signs for Nova Wellness Group Berhad We think you should know.
If you want to find solid companies with high earnings, check this out. free List of companies with good balance sheets and good return on equity.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.