Dufu Technology Berhad (KLSE:DUFU) Will Want To Turn Around Its Return Trends

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Looking at Dufu Technology Berhad (KLSE:DUFU), it does have a high ROCE right now, but lets see how returns are trending.

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Understanding 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 Dufu Technology Berhad, this is the formula:

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

0.31 = RM122m ÷ (RM445m - RM56m) (Based on the trailing twelve months to September 2025).

Therefore, Dufu Technology Berhad has an ROCE of 31%. In absolute terms that's a great return and it's even better than the Machinery industry average of 9.0%.

Check out our latest analysis for Dufu Technology Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Dufu Technology Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Dufu Technology Berhad.

So How Is Dufu Technology Berhad's ROCE Trending?

When we looked at the ROCE trend at Dufu Technology Berhad, we didn't gain much confidence. Historically returns on capital were even higher at 52%, but they have dropped over the last five years. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line

While returns have fallen for Dufu Technology Berhad in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. These growth trends haven't led to growth returns though, since the stock has fallen 27% over the last five years. So we think it'd be worthwhile to look further into this stock given the trends look encouraging.

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

If you want to search for more stocks that have been earning high returns, check out this free list of stocks with solid balance sheets that are also earning high 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.