Capital Allocation Trends At Nova Wellness Group Berhad (KLSE:NOVA) Aren't Ideal

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Having said that, from a first glance at Nova Wellness Group Berhad (KLSE:NOVA) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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Return On Capital Employed (ROCE): What Is It?

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 Nova Wellness Group Berhad:

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

0.082 = RM9.4m ÷ (RM119m - RM5.1m) (Based on the trailing twelve months to June 2025).

Therefore, Nova Wellness Group Berhad has an ROCE of 8.2%. In absolute terms, that's a low return and it also under-performs the Personal Products industry average of 11%.

View our latest analysis for Nova Wellness Group Berhad

Above you can see how the current ROCE for Nova Wellness Group 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 Nova Wellness Group Berhad .

How Are Returns Trending?

On the surface, the trend of ROCE at Nova Wellness Group Berhad doesn't inspire confidence. Over the last five years, returns on capital have decreased to 8.2% from 18% five years ago. 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.

Our Take On Nova Wellness Group Berhad's ROCE

In summary, Nova Wellness Group Berhad is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 57% in the last five years. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.

If you want to continue researching Nova Wellness Group Berhad, you might be interested to know about the 2 warning signs that our analysis has discovered.

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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.