Returns On Capital At Ocean Fresh Berhad (KLSE:OFB) Paint A Concerning Picture

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. Although, when we looked at Ocean Fresh Berhad (KLSE:OFB), it didn't seem to tick all of these boxes.

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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 Ocean Fresh Berhad is:

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

0.0065 = RM400k ÷ (RM71m - RM10m) (Based on the trailing twelve months to September 2025).

Therefore, Ocean Fresh Berhad has an ROCE of 0.7%. In absolute terms, that's a low return and it also under-performs the Food industry average of 10%.

See our latest analysis for Ocean Fresh Berhad

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

So How Is Ocean Fresh Berhad's ROCE Trending?

On the surface, the trend of ROCE at Ocean Fresh Berhad doesn't inspire confidence. Around four years ago the returns on capital were 11%, but since then they've fallen to 0.7%. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.

On a side note, Ocean Fresh Berhad has done well to pay down its current liabilities to 14% of total assets. That could partly explain why the ROCE has dropped. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Key Takeaway

To conclude, we've found that Ocean Fresh Berhad is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 54% in the last year. On the whole, we aren't too inspired by the underlying trends and we think there may be better chances of finding a multi-bagger elsewhere.

If you'd like to know more about Ocean Fresh Berhad, we've spotted 4 warning signs, and 2 of them are a bit concerning.

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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.