Returns Are Gaining Momentum At Parkson Holdings Berhad (KLSE:PARKSON)

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Parkson Holdings Berhad (KLSE:PARKSON) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

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. Analysts use this formula to calculate it for Parkson Holdings Berhad:

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

0.062 = RM380m ÷ (RM8.3b - RM2.2b) (Based on the trailing twelve months to March 2025).

So, Parkson Holdings Berhad has an ROCE of 6.2%. In absolute terms, that's a low return but it's around the Multiline Retail industry average of 6.8%.

View our latest analysis for Parkson Holdings 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Parkson Holdings Berhad.

What The Trend Of ROCE Can Tell Us

You'd find it hard not to be impressed with the ROCE trend at Parkson Holdings Berhad. We found that the returns on capital employed over the last five years have risen by 686%. The company is now earning RM0.06 per dollar of capital employed. Speaking of capital employed, the company is actually utilizing 30% less than it was five years ago, which can be indicative of a business that's improving its efficiency. If this trend continues, the business might be getting more efficient but it's shrinking in terms of total assets.

The Key Takeaway

In summary, it's great to see that Parkson Holdings Berhad has been able to turn things around and earn higher returns on lower amounts of capital. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Parkson Holdings Berhad can keep these trends up, it could have a bright future ahead.

On a separate note, we've found 2 warning signs for Parkson Holdings Berhad you'll probably want to know about.

While Parkson Holdings 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.