Here's What To Make Of Ekovest Berhad's (KLSE:EKOVEST) Decelerating Rates Of Return

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Ekovest Berhad (KLSE:EKOVEST) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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 Ekovest Berhad, this is the formula:

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

0.032 = RM306m ÷ (RM12b - RM1.8b) (Based on the trailing twelve months to June 2024).

So, Ekovest Berhad has an ROCE of 3.2%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 9.4%.

Check out our latest analysis for Ekovest Berhad

In the above chart we have measured Ekovest Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Ekovest Berhad .

So How Is Ekovest Berhad's ROCE Trending?

There hasn't been much to report for Ekovest Berhad's returns and its level of capital employed because both metrics have been steady for the past five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if Ekovest Berhad doesn't end up being a multi-bagger in a few years time.

What We Can Learn From Ekovest Berhad's ROCE

In a nutshell, Ekovest Berhad has been trudging along with the same returns from the same amount of capital over the last five years. And in the last five years, the stock has given away 57% so the market doesn't look too hopeful on these trends strengthening any time soon. 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.

Ekovest Berhad does have some risks, we noticed 2 warning signs (and 1 which is concerning) we think you should know about.

While Ekovest Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.