Under The Bonnet, D & O Green Technologies Berhad's (KLSE:D&O) Returns Look Impressive

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in D & O Green Technologies Berhad's (KLSE:D&O) returns on capital, so let's have a look.

What is 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. The formula for this calculation on D & O Green Technologies Berhad is:

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

0.20 = RM186m ÷ (RM1.4b - RM428m) (Based on the trailing twelve months to March 2022).

So, D & O Green Technologies Berhad has an ROCE of 20%. In absolute terms that's a great return and it's even better than the Semiconductor industry average of 16%.

Check out our latest analysis for D & O Green Technologies Berhad

In the above chart we have measured D & O Green Technologies Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering D & O Green Technologies Berhad here for free.

How Are Returns Trending?

D & O Green Technologies Berhad is displaying some positive trends. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 20%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 197%. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.

The Bottom Line

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what D & O Green Technologies Berhad has. 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 D & O Green Technologies Berhad can keep these trends up, it could have a bright future ahead.

On a final note, we found 2 warning signs for D & O Green Technologies Berhad (1 is a bit unpleasant) you should be aware of.

D & O Green Technologies Berhad is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.