Returns At OCB Berhad (KLSE:OCB) Are On The Way Up

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. So on that note, OCB Berhad (KLSE:OCB) looks quite promising in regards to its trends of return on capital.

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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 OCB Berhad, this is the formula:

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

0.17 = RM35m ÷ (RM279m - RM69m) (Based on the trailing twelve months to June 2025).

Thus, OCB Berhad has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 9.7% generated by the Food industry.

See our latest analysis for OCB Berhad

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

What Does the ROCE Trend For OCB Berhad Tell Us?

OCB Berhad has broken into the black (profitability) and we're sure it's a sight for sore eyes. While the business was unprofitable in the past, it's now turned things around and is earning 17% on its capital. While returns have increased, the amount of capital employed by OCB Berhad has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Key Takeaway

To bring it all together, OCB Berhad has done well to increase the returns it's generating from its capital employed. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know about the risks facing OCB Berhad, we've discovered 4 warning signs that you should be aware of.

While OCB Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list 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.