Did you know there are some financial metrics that can provide clues of a potential multi-bagger? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. However, after investigating LTKM Berhad (KLSE:LTKM), we don't think it's current trends fit the mold of a multi-bagger.

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on LTKM Berhad is:

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

0.11 = RM34m ÷ (RM388m - RM67m) (Based on the trailing twelve months to June 2024).

Therefore, LTKM Berhad has an ROCE of 11%. On its own, that's a standard return, however it's much better than the 8.7% generated by the Food industry.

See our latest analysis for LTKM Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how LTKM Berhad has performed in the past in other metrics, you can view this free graph of LTKM Berhad's past earnings, revenue and cash flow.

Things have been pretty stable at LTKM Berhad, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So unless we see a substantial change at LTKM Berhad in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

We can conclude that in regards to LTKM Berhad's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 18% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.

LTKM Berhad does have some risks though, and we've spotted 2 warning signs for LTKM Berhad that you might be interested in.