Returns On Capital At Hartalega Holdings Berhad (KLSE:HARTA) Paint A Concerning Picture

There are a few key trends to look for if we want to identify the next multi-bagger. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. However, after investigating Hartalega Holdings Berhad (KLSE:HARTA), we don't think it's current trends fit the mold of a multi-bagger.

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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. The formula for this calculation on Hartalega Holdings Berhad is:

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

0.011 = RM50m ÷ (RM4.7b - RM240m) (Based on the trailing twelve months to March 2025).

So, Hartalega Holdings Berhad has an ROCE of 1.1%. Ultimately, that's a low return and it under-performs the Medical Equipment industry average of 7.9%.

View our latest analysis for Hartalega Holdings Berhad

In the above chart we have measured Hartalega Holdings Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Hartalega Holdings Berhad for free.

The Trend Of ROCE

When we looked at the ROCE trend at Hartalega Holdings Berhad, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 1.1% from 19% five years ago. Although, given both revenue and the amount of assets employed in the business have increased, it could suggest the company is investing in growth, and the extra capital has led to a short-term reduction in ROCE. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

The Bottom Line On Hartalega Holdings Berhad's ROCE

In summary, despite lower returns in the short term, we're encouraged to see that Hartalega Holdings Berhad is reinvesting for growth and has higher sales as a result. Despite these promising trends, the stock has collapsed 88% over the last five years, so there could be other factors hurting the company's prospects. Therefore, we'd suggest researching the stock further to uncover more about the business.

While Hartalega Holdings Berhad doesn't shine too bright in this respect, it's still worth seeing if the company is trading at attractive prices. You can find that out with our FREE intrinsic value estimation for HARTA on our platform.

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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.