Investors Will Want Bonia Corporation Berhad's (KLSE:BONIA) Growth In ROCE To Persist

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. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So on that note, Bonia Corporation Berhad (KLSE:BONIA) looks quite promising in regards to its trends of return on capital.

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. Analysts use this formula to calculate it for Bonia Corporation Berhad:

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

0.15 = RM77m ÷ (RM633m - RM107m) (Based on the trailing twelve months to September 2022).

Thus, Bonia Corporation Berhad has an ROCE of 15%. In absolute terms, that's a pretty standard return but compared to the Specialty Retail industry average it falls behind.

View our latest analysis for Bonia Corporation Berhad

In the above chart we have measured Bonia Corporation Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free report for Bonia Corporation Berhad.

What Can We Tell From Bonia Corporation Berhad's ROCE Trend?

Bonia Corporation Berhad has not disappointed with their ROCE growth. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 75% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

To sum it up, Bonia Corporation Berhad is collecting higher returns from the same amount of capital, and that's impressive. And investors seem to expect more of this going forward, since the stock has rewarded shareholders with a 74% return over the last five years. Therefore, we think it would be worth your time to check if these trends are going to continue.

Bonia Corporation Berhad does have some risks, we noticed 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

While Bonia Corporation Berhad may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.