What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at TIME dotCom Berhad (KLSE:TIMECOM) 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. The formula for this calculation on TIME dotCom Berhad is:

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

0.14 = RM503m ÷ (RM4.2b - RM562m) (Based on the trailing twelve months to December 2022).

Therefore, TIME dotCom Berhad has an ROCE of 14%. In absolute terms, that's a satisfactory return, but compared to the Telecom industry average of 9.0% it's much better.

Check out our latest analysis for TIME dotCom Berhad

Above you can see how the current ROCE for TIME dotCom 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 TIME dotCom Berhad's ROCE Trending?

We like the trends that we're seeing from TIME dotCom Berhad. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 14%. The amount of capital employed has increased too, by 43%. So we're very much inspired by what we're seeing at TIME dotCom Berhad thanks to its ability to profitably reinvest capital.

What We Can Learn From TIME dotCom Berhad's ROCE

To sum it up, TIME dotCom Berhad has proven it can reinvest in the business and generate higher returns on that capital employed, which is terrific. And a remarkable 140% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if TIME dotCom Berhad can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing TIME dotCom Berhad that you might find interesting.

While TIME dotCom 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.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here