Some Investors May Be Worried About Globetronics Technology Bhd's (KLSE:GTRONIC) Returns On Capital

What financial metrics can indicate to us that a company is maturing or even in decline? More often than not, we'll see a declining return on capital employed (ROCE) and a declining amount of capital employed. This combination can tell you that not only is the company investing less, it's earning less on what it does invest. In light of that, from a first glance at Globetronics Technology Bhd (KLSE:GTRONIC), we've spotted some signs that it could be struggling, so let's investigate.

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

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Globetronics Technology Bhd is:

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

0.024 = RM7.4m ÷ (RM330m - RM24m) (Based on the trailing twelve months to June 2025).

Thus, Globetronics Technology Bhd has an ROCE of 2.4%. In absolute terms, that's a low return and it also under-performs the Semiconductor industry average of 8.3%.

Check out our latest analysis for Globetronics Technology Bhd

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 Globetronics Technology Bhd.

So How Is Globetronics Technology Bhd's ROCE Trending?

There is reason to be cautious about Globetronics Technology Bhd, given the returns are trending downwards. About five years ago, returns on capital were 16%, however they're now substantially lower than that as we saw above. Meanwhile, capital employed in the business has stayed roughly the flat over the period. Since returns are falling and the business has the same amount of assets employed, this can suggest it's a mature business that hasn't had much growth in the last five years. If these trends continue, we wouldn't expect Globetronics Technology Bhd to turn into a multi-bagger.

The Bottom Line On Globetronics Technology Bhd's ROCE

In summary, it's unfortunate that Globetronics Technology Bhd is generating lower returns from the same amount of capital. We expect this has contributed to the stock plummeting 87% during the last five years. That being the case, unless the underlying trends revert to a more positive trajectory, we'd consider looking elsewhere.

One final note, you should learn about the 3 warning signs we've spotted with Globetronics Technology Bhd (including 1 which is concerning) .

While Globetronics Technology Bhd 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.