Investors Will Want Eversendai Corporation Berhad's (KLSE:SENDAI) Growth In ROCE To Persist

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base 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. So on that note, Eversendai Corporation Berhad (KLSE:SENDAI) looks quite promising in regards to its trends of return on capital.

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What Is 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 Eversendai Corporation Berhad is:

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

0.044 = RM41m ÷ (RM2.8b - RM1.8b) (Based on the trailing twelve months to June 2025).

Thus, Eversendai Corporation Berhad has an ROCE of 4.4%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 9.9%.

Check out our latest analysis for Eversendai Corporation Berhad

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

So How Is Eversendai Corporation Berhad's ROCE Trending?

Even though ROCE is still low in absolute terms, it's good to see it's heading in the right direction. We found that the returns on capital employed over the last five years have risen by 661%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. In regards to capital employed, Eversendai Corporation Berhad appears to been achieving more with less, since the business is using 50% less capital to run its operation. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. The current liabilities has increased to 66% of total assets, so the business is now more funded by the likes of its suppliers or short-term creditors. And with current liabilities at those levels, that's pretty high.

The Key Takeaway

In a nutshell, we're pleased to see that Eversendai Corporation Berhad has been able to generate higher returns from less capital. Since the stock has returned a solid 49% to shareholders over the last five years, it's fair to say investors are beginning to recognize these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you want to know some of the risks facing Eversendai Corporation Berhad we've found 2 warning signs (1 doesn't sit too well with us!) that you should be aware of before investing 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.