The Returns On Capital At Tri-Mode System (M) Berhad (KLSE:TRIMODE) Don't Inspire Confidence

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount 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. Having said that, from a first glance at Tri-Mode System (M) Berhad (KLSE:TRIMODE) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look.

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

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on Tri-Mode System (M) Berhad is:

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

0.027 = RM4.2m ÷ (RM172m - RM17m) (Based on the trailing twelve months to June 2025).

Thus, Tri-Mode System (M) Berhad has an ROCE of 2.7%. Ultimately, that's a low return and it under-performs the Logistics industry average of 3.7%.

View our latest analysis for Tri-Mode System (M) 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'd like to look at how Tri-Mode System (M) Berhad has performed in the past in other metrics, you can view this free graph of Tri-Mode System (M) Berhad's past earnings, revenue and cash flow.

How Are Returns Trending?

On the surface, the trend of ROCE at Tri-Mode System (M) Berhad doesn't inspire confidence. Over the last five years, returns on capital have decreased to 2.7% from 4.3% five years ago. However, given capital employed and revenue have both increased it appears that the business is currently pursuing growth, at the consequence of short term returns. And if the increased capital generates additional returns, the business, and thus shareholders, will benefit in the long run.

What We Can Learn From Tri-Mode System (M) Berhad's ROCE

While returns have fallen for Tri-Mode System (M) Berhad in recent times, we're encouraged to see that sales are growing and that the business is reinvesting in its operations. However, despite the promising trends, the stock has fallen 48% over the last five years, so there might be an opportunity here for astute investors. As a result, we'd recommend researching this stock further to uncover what other fundamentals of the business can show us.

On a final note, we found 5 warning signs for Tri-Mode System (M) Berhad (3 can't be ignored) you should be aware of.

While Tri-Mode System (M) 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.