Adventa Berhad (KLSE:ADVENTA) Might Have The Makings Of A Multi-Bagger

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So on that note, Adventa Berhad (KLSE:ADVENTA) looks quite promising in regards to its trends of return on capital.

AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early.

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 Adventa Berhad is:

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

0.0078 = RM807k ÷ (RM117m - RM14m) (Based on the trailing twelve months to March 2025).

So, Adventa Berhad has an ROCE of 0.8%. In absolute terms, that's a low return and it also under-performs the Medical Equipment industry average of 8.1%.

View our latest analysis for Adventa Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Adventa Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Adventa Berhad.

So How Is Adventa Berhad's ROCE Trending?

The fact that Adventa 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 0.8% on its capital. And unsurprisingly, like most companies trying to break into the black, Adventa Berhad is utilizing 50% more capital than it was five years ago. 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.

One more thing to note, Adventa Berhad has decreased current liabilities to 12% of total assets over this period, which effectively reduces the amount of funding from suppliers or short-term creditors. So this improvement in ROCE has come from the business' underlying economics, which is great to see.

Our Take On Adventa Berhad's ROCE

To the delight of most shareholders, Adventa Berhad has now broken into profitability. And since the stock has dived 86% over the last five years, there may be other factors affecting the company's prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

One more thing, we've spotted 1 warning sign facing Adventa Berhad that you might find interesting.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.