MSL Solutions (ASX: MSL) Payout Trends Look Promising

Finding a company that has the potential to grow exponentially is not easy, but it is possible if we look at some key financial metrics. One common method is to try to find a company with them yields On working capital (ROCE) which is increasing in tandem with growth amount of working capital. Essentially, this means that the company has profitable initiatives that it can continue to reinvest in, which is a feature of the installation machine. On this note, MSL Solutions (ASX:MSL) looks very promising in terms of return on capital trends.

What is Return on Capital Employed (ROCE)?

For those who aren’t sure what a ROCE is, it measures the amount of pre-tax earnings a company can make from the capital used in its business. To calculate this scale for MSL solutions, this is the formula:

Return on capital employed = EBIT ÷ (Total Assets – Current Liabilities)

0.043 = 1.4 million Australian dollars (46 million Australian dollars – 12 million Australian dollars) (Based on the subsequent twelve months to December 2021).

So, MSL Solutions has a return of 4.3%. In the end, this is a low return and beats the software industry average of 13%.

Check out our latest analysis of MSL solutions

year

Above you can see how ROCE’s current MSL solution compares to its past returns on capital, but there’s only so much you can tell from the past. If you want to know what analysts expect in the future, you should check out Free MSL Solutions Report.

Russia direction

We are pleased to see that MSL Solutions is reaping the rewards of its investment and has now broken into profitability. Historically, the company has been incurring losses but as we can see from the latest figures indicated above, they are now earning 4.3% on their capital employed. In addition, the company is using 34% less capital than it did five years ago, and it is taken at face value, which may mean that the company needs less money in the business to get a return. This may mean that the company is selling some of its assets.

Conclusion in ROCE for MSL Solutions

From what we saw above, MSL Solutions was able to increase its return on capital while reducing its capital base. With inventory down 42% in the past five years, this could be a good investment if the valuation and other metrics are also attractive. So further research into this company and determining whether or not these trends will continue seems warranted.

Like most companies, MSL solutions come with some risks, and we’ve found that 3 warning signs which you should be aware of.

Although MSL Solutions may not currently generate the highest returns, we have compiled a list of companies that are currently generating more than 25% return on equity. Take a look at this Free List here.

Do you have feedback on this article? Worried about the content? keep in touch with us directly. Instead, email the editorial team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide comments based solely on historical data and analyst expectations 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, nor does it take into account your objectives or financial situation. We aim to provide you with focused, long-term analysis driven by essential data. Note that our analysis may not include the company’s most recent price-sensitive ads or quality materials. Wall Street simply has no position in any of the stocks mentioned.

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