Investors Will Want SD Guthrie Berhad's (KLSE:SDG) Growth In ROCE To Persist

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. 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 when we looked at SD Guthrie Berhad (KLSE:SDG) and its trend of ROCE, we really liked what we saw.

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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. The formula for this calculation on SD Guthrie Berhad is:

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

0.12 = RM3.3b ÷ (RM32b - RM5.1b) (Based on the trailing twelve months to June 2025).

Therefore, SD Guthrie Berhad has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 9.7% generated by the Food industry.

View our latest analysis for SD Guthrie Berhad

Above you can see how the current ROCE for SD Guthrie Berhad compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for SD Guthrie Berhad .

What Does the ROCE Trend For SD Guthrie Berhad Tell Us?

SD Guthrie Berhad's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 135% in that same time. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Bottom Line On SD Guthrie Berhad's ROCE

To bring it all together, SD Guthrie Berhad has done well to increase the returns it's generating from its capital employed. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 27% to shareholders. So with that in mind, we think the stock deserves further research.

On a final note, we found 2 warning signs for SD Guthrie Berhad (1 shouldn't be ignored) you should be aware of.

While SD Guthrie 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.