There Are Reasons To Feel Uneasy About BWYS Group Berhad's (KLSE:BWYS) Returns On Capital

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at BWYS Group Berhad (KLSE:BWYS) and its ROCE trend, we weren't exactly thrilled.

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What Is Return On Capital Employed (ROCE)?

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on BWYS Group Berhad is:

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

0.073 = RM21m ÷ (RM399m - RM114m) (Based on the trailing twelve months to March 2025).

Therefore, BWYS Group Berhad has an ROCE of 7.3%. On its own that's a low return on capital but it's in line with the industry's average returns of 7.3%.

See our latest analysis for BWYS Group Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for BWYS Group Berhad's ROCE against it's prior returns. If you're interested in investigating BWYS Group Berhad's past further, check out this free graph covering BWYS Group Berhad's past earnings, revenue and cash flow.

So How Is BWYS Group Berhad's ROCE Trending?

When we looked at the ROCE trend at BWYS Group Berhad, we didn't gain much confidence. Around four years ago the returns on capital were 9.3%, but since then they've fallen to 7.3%. 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 may take some time before the company starts to see any change in earnings from these investments.

The Bottom Line

In summary, BWYS Group Berhad is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. Since the stock has declined 32% over the last year, investors may not be too optimistic on this trend improving either. Therefore based on the analysis done in this article, we don't think BWYS Group Berhad has the makings of a multi-bagger.

If you want to know some of the risks facing BWYS Group Berhad we've found 4 warning signs (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

While BWYS Group Berhad isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

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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.