DFCITY Group Berhad (KLSE:DFCITY) Shareholders Will Want The ROCE Trajectory To Continue

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. With that in mind, we've noticed some promising trends at DFCITY Group Berhad (KLSE:DFCITY) so let's look a bit deeper.

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What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on DFCITY Group Berhad is:

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

0.041 = RM2.6m ÷ (RM83m - RM21m) (Based on the trailing twelve months to June 2025).

Therefore, DFCITY Group Berhad has an ROCE of 4.1%. Ultimately, that's a low return and it under-performs the Basic Materials industry average of 6.7%.

View our latest analysis for DFCITY Group Berhad

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

How Are Returns Trending?

Shareholders will be relieved that DFCITY Group Berhad has broken into profitability. The company now earns 4.1% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. So if you're looking for high growth, you'll want to see a business's capital employed also increasing.

The Bottom Line

To sum it up, DFCITY Group Berhad is collecting higher returns from the same amount of capital, and that's impressive. And given the stock has remained rather flat over the last five years, there might be an opportunity here if other metrics are strong. So researching this company further and determining whether or not these trends will continue seems justified.

One more thing to note, we've identified 3 warning signs with DFCITY Group Berhad and understanding these should be part of your investment process.

If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.

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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.