Returns On Capital At Asian Pay Television Trust (SGX:S7OU) Have Hit The Brakes

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Asian Pay Television Trust (SGX:S7OU), we don't think it's current trends fit the mold of a multi-bagger.

What Is Return On Capital Employed (ROCE)?

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 Asian Pay Television Trust, this is the formula:

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

0.04 = S$98m ÷ (S$2.6b - S$157m) (Based on the trailing twelve months to June 2023).

So, Asian Pay Television Trust has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Media industry average of 7.6%.

See our latest analysis for Asian Pay Television Trust

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

What Can We Tell From Asian Pay Television Trust's ROCE Trend?

Over the past five years, Asian Pay Television Trust's ROCE and capital employed have both remained mostly flat. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. With that in mind, unless investment picks up again in the future, we wouldn't expect Asian Pay Television Trust to be a multi-bagger going forward.

What We Can Learn From Asian Pay Television Trust's ROCE

In a nutshell, Asian Pay Television Trust has been trudging along with the same returns from the same amount of capital over the last five years. Additionally, the stock's total return to shareholders over the last five years has been flat, which isn't too surprising. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you want to know some of the risks facing Asian Pay Television Trust we've found 2 warning signs (1 shouldn't be ignored!) that you should be aware of before investing here.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.