Evergreen Fibreboard Berhad's (KLSE:EVERGRN) Returns On Capital Are Heading Higher

What are the early trends we should look for to identify a stock that could multiply in value over the long term? 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Evergreen Fibreboard Berhad's (KLSE:EVERGRN) returns on capital, so let's have a 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. To calculate this metric for Evergreen Fibreboard Berhad, this is the formula:

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

0.0013 = RM1.5m ÷ (RM1.4b - RM284m) (Based on the trailing twelve months to June 2025).

Therefore, Evergreen Fibreboard Berhad has an ROCE of 0.1%. Ultimately, that's a low return and it under-performs the Forestry industry average of 6.8%.

Check out our latest analysis for Evergreen Fibreboard Berhad

Above you can see how the current ROCE for Evergreen Fibreboard 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 Evergreen Fibreboard Berhad .

What Does the ROCE Trend For Evergreen Fibreboard Berhad Tell Us?

Shareholders will be relieved that Evergreen Fibreboard Berhad has broken into profitability. The company now earns 0.1% on its capital, because five years ago it was incurring losses. While returns have increased, the amount of capital employed by Evergreen Fibreboard Berhad has remained flat over the period. With no noticeable increase in capital employed, it's worth knowing what the company plans on doing going forward in regards to reinvesting and growing the business. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

Our Take On Evergreen Fibreboard Berhad's ROCE

In summary, we're delighted to see that Evergreen Fibreboard Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 30% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

On a separate note, we've found 1 warning sign for Evergreen Fibreboard Berhad you'll probably want to know about.

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.