Rex International Holding (SGX:5WH) Is Doing The Right Things To Multiply Its Share Price

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Rex International Holding's (SGX:5WH) returns on capital, so let's have a look.

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

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 Rex International Holding, this is the formula:

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

0.041 = US$19m ÷ (US$572m - US$107m) (Based on the trailing twelve months to December 2024).

Therefore, Rex International Holding has an ROCE of 4.1%. Ultimately, that's a low return and it under-performs the Energy Services industry average of 6.6%.

Check out our latest analysis for Rex International Holding

Historical performance is a great place to start when researching a stock so above you can see the gauge for Rex International Holding's ROCE against it's prior returns. If you'd like to look at how Rex International Holding has performed in the past in other metrics, you can view this free graph of Rex International Holding's past earnings, revenue and cash flow .

What Does the ROCE Trend For Rex International Holding Tell Us?

Rex International Holding has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 4.1% which is a sight for sore eyes. Not only that, but the company is utilizing 195% more capital than before, but that's to be expected from a company trying to break into profitability. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, both common traits of a multi-bagger.

The Bottom Line On Rex International Holding's ROCE

To the delight of most shareholders, Rex International Holding has now broken into profitability. Considering the stock has delivered 9.7% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. So with that in mind, we think the stock deserves further research.

On a final note, we found 2 warning signs for Rex International Holding (1 doesn't sit too well with us) you should be aware of.

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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.