It's possible that Sports Toto Berhad (KLSE:SPTOTO) is having trouble using its capital effectively.

Did you realize that certain financial parameters can offer hints about a possible multi-bagger? 

In an ideal world, we'd like to see businesses pouring more money into their operations and, 

ideally, seeing rising returns on that investment. 

This demonstrates that it is a compounding machine that can perpetually reinvest its profits back into the company to produce bigger returns. However, Sports Toto Berhad (KLSE: SPTOTO) didn't seem to check off all of these criteria when we looked at it. 먹튀검증

What Is the Return On Capital Employed (ROCE)?

If you're still unclear, let me just make it clear that ROCE is a metric for assessing how much pre-tax income (in percentage terms) a corporation earns on the capital invested in its enterprise. This is the formula to determine this metric for Sports Toto Berhad:

Earnings Before Interest and Tax (EBIT) (Total Assets - Current Liabilities) is the formula for return on capital employed.

(Based on the trailing twelve months to December 2022) 0.18 = RM416m (RM3.5b minus RM1.2b).

Sports Toto Berhad thus has a ROCE of 18%. That's a typical return on its own, but it outperforms the 6.1% produced by the hospitality sector.

What The ROCE Trend Can Teach Us

We weren't very confident after looking at the ROCE trend at Sports Toto Berhad. Returns on capital have dropped from 32% to 18% during the past five years. However, it appears that the company is currently seeking growth at the expense of short-term returns given that both capital used and revenue have increased. If these investments turn out to be profitable, this may be quite encouraging for the long-term performance of stocks. 온라인카지노

Sports Toto Berhad has done well to reduce its current liabilities to 35% of total assets, as a side remark. We could therefore attribute some of this to the decline in ROCE. Effectively, this means that their short-term creditors or suppliers are funding a smaller portion of the company, which lowers some factors of risk. You could argue that this has reduced the company's ability to generate ROCE because it is essentially funding more of its activities with its own money.

The Important Point

Although short-term capital returns have decreased, we find it encouraging that Sports Toto Berhad's revenue and capital employed have both grown. Additionally, if other indicators appear positive as well, there may be a chance here, as the Final, we want to let you know about 2 red flags we've uncovered for Sports Toto Berhad. 

Check out our free list of businesses with strong balance sheets and excellent returns on equity if you like to invest in dependable companies. 주소모음

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Generally speaking, this piece from Simply Wall St. Our articles are not meant to be financial advice; instead, we offer comments based only on analyst estimates and historical data using an unbiased methodology. It is not intended to be a recommendation to buy or sell any stock, and it doesn't take into consideration your goals or financial position.