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

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding 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. Speaking of which, we noticed some great changes in Focus Dynamics Group Berhad's (KLSE:FOCUS) returns on capital, so let's have a look.

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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. Analysts use this formula to calculate it for Focus Dynamics Group Berhad:

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

0.0034 = RM576k ÷ (RM260m - RM90m) (Based on the trailing twelve months to March 2025).

So, Focus Dynamics Group Berhad has an ROCE of 0.3%. Ultimately, that's a low return and it under-performs the Hospitality industry average of 8.4%.

View 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Focus Dynamics Group Berhad.

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

The fact that Focus Dynamics Group Berhad is now generating some pre-tax profits from its prior investments is very encouraging. About five years ago the company was generating losses but things have turned around because it's now earning 0.3% on its capital. Not only that, but the company is utilizing 274% more capital than before, but that's to be expected from a company 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.

Our Take On Focus Dynamics Group Berhad's ROCE

To the delight of most shareholders, Focus Dynamics Group Berhad has now broken into profitability. And since the stock has dived 99% over the last five years, there may be other factors affecting the company's prospects. Still, it's worth doing some further research to see if the trends will continue into the future.

One more thing: We've identified 3 warning signs with Focus Dynamics Group Berhad (at least 2 which make us uncomfortable) , and understanding these would certainly be useful.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive 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.