Focus Dynamics Group Berhad (KLSE:FOCUS) Is Doing The Right Things To Multiply Its Share Price

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at Focus Dynamics Group Berhad (KLSE:FOCUS) and its trend of ROCE, we really liked what we saw.

What is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for Focus Dynamics Group Berhad, this is the formula:

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

0.088 = RM22m ÷ (RM290m - RM38m) (Based on the trailing twelve months to March 2021).

So, Focus Dynamics Group Berhad has an ROCE of 8.8%. In absolute terms, that's a low return but it's around the Hospitality industry average of 7.6%.

Check out our latest analysis for Focus Dynamics Group 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 Focus Dynamics Group Berhad has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Does the ROCE Trend For Focus Dynamics Group Berhad Tell Us?

Focus Dynamics Group Berhad has recently broken into profitability so their prior investments seem to be paying off. The company was generating losses five years ago, but now it's earning 8.8% which is a sight for sore eyes. In addition to that, Focus Dynamics Group Berhad is employing 565% more capital than previously which is expected of a company that's trying to break into profitability. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

In Conclusion...

To the delight of most shareholders, Focus Dynamics Group Berhad has now broken into profitability. Since the stock has returned a staggering 366% to shareholders over the last five years, it looks like investors are recognizing these changes. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

Like most companies, Focus Dynamics Group Berhad does come with some risks, and we've found 4 warning signs that you should be aware of.

While Focus Dynamics Group 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. 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.
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