Benalec Holdings Berhad (KLSE:BENALEC) Is Experiencing Growth In Returns On Capital

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Benalec Holdings Berhad's (KLSE:BENALEC) returns on capital, so let's have a look.

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Understanding Return On Capital Employed (ROCE)

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 Benalec Holdings Berhad is:

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

0.034 = RM17m ÷ (RM614m - RM109m) (Based on the trailing twelve months to June 2025).

So, Benalec Holdings Berhad has an ROCE of 3.4%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 10%.

View our latest analysis for Benalec Holdings 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 Benalec Holdings Berhad has performed in the past in other metrics, you can view this free graph of Benalec Holdings Berhad's past earnings, revenue and cash flow.

What Can We Tell From Benalec Holdings Berhad's ROCE Trend?

Like most people, we're pleased that Benalec Holdings Berhad is now generating some pretax earnings. Historically the company was generating losses but as we can see from the latest figures referenced above, they're now earning 3.4% on their capital employed. At first glance, it seems the business is getting more proficient at generating returns, because over the same period, the amount of capital employed has reduced by 28%. This could potentially mean that the company is selling some of its assets.

What We Can Learn From Benalec Holdings Berhad's ROCE

In the end, Benalec Holdings Berhad has proven it's capital allocation skills are good with those higher returns from less amount of capital. Astute investors may have an opportunity here because the stock has declined 14% in the last five years. That being the case, research into the company's current valuation metrics and future prospects seems fitting.

If you'd like to know more about Benalec Holdings Berhad, we've spotted 2 warning signs, and 1 of them can't be ignored.

While Benalec Holdings Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.