Be Wary Of MST Golf Group Berhad (KLSE:MSTGOLF) And Its Returns On Capital

There are a few key trends to look for if we want to identify the next multi-bagger. One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. Although, when we looked at MST Golf Group Berhad (KLSE:MSTGOLF), it didn't seem to tick all of these boxes.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on MST Golf Group Berhad is:

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

0.029 = RM8.8m ÷ (RM376m - RM69m) (Based on the trailing twelve months to September 2025).

So, MST Golf Group Berhad has an ROCE of 2.9%. In absolute terms, that's a low return and it also under-performs the Specialty Retail industry average of 10%.

See our latest analysis for MST Golf Group Berhad

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating MST Golf Group Berhad's past further, check out this free graph covering MST Golf Group Berhad's past earnings, revenue and cash flow.

How Are Returns Trending?

When we looked at the ROCE trend at MST Golf Group Berhad, we didn't gain much confidence. Over the last five years, returns on capital have decreased to 2.9% from 28% five years ago. However it looks like MST Golf Group Berhad might be reinvesting for long term growth because while capital employed has increased, the company's sales haven't changed much in the last 12 months. 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.

On a related note, MST Golf Group Berhad has decreased its current liabilities to 18% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Some would claim this reduces the business' efficiency at generating ROCE since it is now funding more of the operations with its own money.

The Key Takeaway

To conclude, we've found that MST Golf Group Berhad is reinvesting in the business, but returns have been falling. Since the stock has declined 17% over the last year, investors may not be too optimistic on this trend improving either. In any case, the stock doesn't have these traits of a multi-bagger discussed above, so if that's what you're looking for, we think you'd have more luck elsewhere.

If you'd like to know more about MST Golf Group Berhad, we've spotted 5 warning signs, and 1 of them is concerning.

While MST Golf 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.