We Like Nexgram Holdings Berhad's (KLSE:NEXGRAM) Returns And Here's How They're Trending

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'd want to identify a growing return on capital employed (ROCE) and then alongside that, an ever-increasing base of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at the ROCE trend of Nexgram Holdings Berhad (KLSE:NEXGRAM) we really liked what we saw.

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Understanding Return On Capital Employed (ROCE)

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on Nexgram Holdings Berhad is:

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

0.24 = RM32m ÷ (RM165m - RM30m) (Based on the trailing twelve months to April 2025).

So, Nexgram Holdings Berhad has an ROCE of 24%. That's a fantastic return and not only that, it outpaces the average of 18% earned by companies in a similar industry.

See our latest analysis for Nexgram Holdings Berhad

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

The Trend Of ROCE

We're delighted to see that Nexgram Holdings Berhad is reaping rewards from its investments and has now broken into profitability. While the business was unprofitable in the past, it's now turned things around and is earning 24% on its capital. While returns have increased, the amount of capital employed by Nexgram Holdings Berhad has remained flat over the period. So while we're happy that the business is more efficient, just keep in mind that could mean that going forward the business is lacking areas to invest internally for growth. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

The Bottom Line

In summary, we're delighted to see that Nexgram Holdings Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. However the stock is down a substantial 97% in the last five years so there could be other areas of the business hurting its prospects. In any case, we believe the economic trends of this company are positive and looking into the stock further could prove rewarding.

Nexgram Holdings Berhad does have some risks though, and we've spotted 2 warning signs for Nexgram Holdings Berhad that you might be interested in.

High returns are a key ingredient to strong performance, so check out our free list ofstocks 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.