Investors Could Be Concerned With Orgabio Holdings Berhad's (KLSE:ORGABIO) Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount 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. In light of that, when we looked at Orgabio Holdings Berhad (KLSE:ORGABIO) and its ROCE trend, we weren't exactly thrilled.

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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. Analysts use this formula to calculate it for Orgabio Holdings Berhad:

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

0.11 = RM8.3m ÷ (RM102m - RM29m) (Based on the trailing twelve months to September 2025).

So, Orgabio Holdings Berhad has an ROCE of 11%. In absolute terms, that's a pretty normal return, and it's somewhat close to the Food industry average of 10%.

Check out our latest analysis for Orgabio Holdings 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 Orgabio Holdings Berhad.

What Can We Tell From Orgabio Holdings Berhad's ROCE Trend?

On the surface, the trend of ROCE at Orgabio Holdings Berhad doesn't inspire confidence. To be more specific, ROCE has fallen from 33% over the last five years. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. If these investments prove successful, this can bode very well for long term stock performance.

The Bottom Line On Orgabio Holdings Berhad's ROCE

Even though returns on capital have fallen in the short term, we find it promising that revenue and capital employed have both increased for Orgabio Holdings Berhad. In light of this, the stock has only gained 4.9% over the last three years. Therefore we'd recommend looking further into this stock to confirm if it has the makings of a good investment.

If you'd like to know more about Orgabio Holdings Berhad, we've spotted 2 warning signs, and 1 of them can't be ignored.

While Orgabio Holdings 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.