PETRONAS Gas Berhad (KLSE:PETGAS) Has More To Do To Multiply In Value Going Forward

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. In light of that, when we looked at PETRONAS Gas Berhad (KLSE:PETGAS) and its ROCE trend, we weren't exactly thrilled.

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

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for PETRONAS Gas Berhad, this is the formula:

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

0.13 = RM2.3b ÷ (RM19b - RM1.4b) (Based on the trailing twelve months to June 2025).

Thus, PETRONAS Gas Berhad has an ROCE of 13%. On its own, that's a standard return, however it's much better than the 7.3% generated by the Gas Utilities industry.

See our latest analysis for PETRONAS Gas Berhad

In the above chart we have measured PETRONAS Gas Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for PETRONAS Gas Berhad .

What Can We Tell From PETRONAS Gas Berhad's ROCE Trend?

Things have been pretty stable at PETRONAS Gas Berhad, with its capital employed and returns on that capital staying somewhat the same for the last five years. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So don't be surprised if PETRONAS Gas Berhad doesn't end up being a multi-bagger in a few years time. On top of that you'll notice that PETRONAS Gas Berhad has been paying out a large portion (79%) of earnings in the form of dividends to shareholders. If the company is in fact lacking growth opportunities, that's one of the viable alternatives for the money.

The Bottom Line On PETRONAS Gas Berhad's ROCE

In a nutshell, PETRONAS Gas Berhad has been trudging along with the same returns from the same amount of capital over the last five years. Since the stock has gained an impressive 45% over the last five years, investors must think there's better things to come. However, unless these underlying trends turn more positive, we wouldn't get our hopes up too high.

On a separate note, we've found 1 warning sign for PETRONAS Gas Berhad you'll probably want to know about.

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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.