Digistar Corporation Berhad (KLSE:DIGISTA) Shareholders Will Want The ROCE Trajectory To Continue

There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. So when we looked at Digistar Corporation Berhad (KLSE:DIGISTA) and its trend of ROCE, we really liked what we saw.

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

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

0.034 = RM8.5m ÷ (RM300m - RM51m) (Based on the trailing twelve months to June 2025).

So, Digistar Corporation Berhad has an ROCE of 3.4%. Ultimately, that's a low return and it under-performs the IT industry average of 13%.

View our latest analysis for Digistar Corporation Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Digistar Corporation Berhad's ROCE against it's prior returns. If you're interested in investigating Digistar Corporation Berhad's past further, check out this free graph covering Digistar Corporation Berhad's past earnings, revenue and cash flow.

The Trend Of ROCE

We're delighted to see that Digistar Corporation Berhad is reaping rewards from its investments and has now broken into profitability. While the business is profitable now, it used to be incurring losses on invested capital five years ago. In regards to capital employed, Digistar Corporation Berhad is using 24% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. Digistar Corporation Berhad could be selling under-performing assets since the ROCE is improving.

Our Take On Digistar Corporation Berhad's ROCE

In summary, it's great to see that Digistar Corporation Berhad has been able to turn things around and earn higher returns on lower amounts of capital. Although the company may be facing some issues elsewhere since the stock has plunged 73% in the last five years. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

If you'd like to know about the risks facing Digistar Corporation Berhad, we've discovered 3 warning signs that you should be aware of.

While Digistar 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.