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    Malaysia Steel Works (KL) Bhd's (KLSE:MASTEEL) Returns On Capital Are Heading Higher

    Simply Wall St·12/31/2025 22:00:53
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    To find a multi-bagger stock, what are the underlying trends we should look for in a business? 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. With that in mind, we've noticed some promising trends at Malaysia Steel Works (KL) Bhd (KLSE:MASTEEL) so let's look a bit deeper.

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

    Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Malaysia Steel Works (KL) Bhd is:

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

    0.042 = RM47m ÷ (RM2.5b - RM1.4b) (Based on the trailing twelve months to September 2025).

    So, Malaysia Steel Works (KL) Bhd has an ROCE of 4.2%. Ultimately, that's a low return and it under-performs the Metals and Mining industry average of 7.7%.

    See our latest analysis for Malaysia Steel Works (KL) Bhd

    roce
    KLSE:MASTEEL Return on Capital Employed December 31st 2025

    Historical performance is a great place to start when researching a stock so above you can see the gauge for Malaysia Steel Works (KL) Bhd's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Malaysia Steel Works (KL) Bhd.

    What The Trend Of ROCE Can Tell Us

    The fact that Malaysia Steel Works (KL) Bhd is now generating some pre-tax profits from its prior investments is very encouraging. The company was generating losses five years ago, but now it's earning 4.2% which is a sight for sore eyes. In addition to that, Malaysia Steel Works (KL) Bhd is employing 31% more capital than previously which is expected of a company that's trying to break into profitability. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

    For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Effectively this means that suppliers or short-term creditors are now funding 55% of the business, which is more than it was five years ago. Given it's pretty high ratio, we'd remind investors that having current liabilities at those levels can bring about some risks in certain businesses.

    The Bottom Line

    In summary, it's great to see that Malaysia Steel Works (KL) Bhd has managed to break into profitability and is continuing to reinvest in its business. Astute investors may have an opportunity here because the stock has declined 45% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

    On a final note, we found 2 warning signs for Malaysia Steel Works (KL) Bhd (1 can't be ignored) you should be aware of.

    While Malaysia Steel Works (KL) Bhd isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.