Returns At Puncak Niaga Holdings Berhad (KLSE:PUNCAK) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, 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 Puncak Niaga Holdings Berhad (KLSE:PUNCAK) and its trend of ROCE, we really liked what we saw.

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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. Analysts use this formula to calculate it for Puncak Niaga Holdings Berhad:

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

0.048 = RM99m ÷ (RM2.7b - RM648m) (Based on the trailing twelve months to June 2025).

Therefore, Puncak Niaga Holdings Berhad has an ROCE of 4.8%. Ultimately, that's a low return and it under-performs the Water Utilities industry average of 6.8%.

Check out our latest analysis for Puncak Niaga Holdings Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Puncak Niaga Holdings Berhad's ROCE against it's prior returns. If you'd like to look at how Puncak Niaga Holdings Berhad has performed in the past in other metrics, you can view this free graph of Puncak Niaga Holdings Berhad's past earnings, revenue and cash flow.

What Can We Tell From Puncak Niaga Holdings Berhad's ROCE Trend?

While the ROCE is still rather low for Puncak Niaga Holdings Berhad, we're glad to see it heading in the right direction. We found that the returns on capital employed over the last five years have risen by 110%. That's a very favorable trend because this means that the company is earning more per dollar of capital that's being employed. Interestingly, the business may be becoming more efficient because it's applying 23% less capital than it was five years ago. A business that's shrinking its asset base like this isn't usually typical of a soon to be multi-bagger company.

In Conclusion...

From what we've seen above, Puncak Niaga Holdings Berhad has managed to increase it's returns on capital all the while reducing it's capital base. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 16% to shareholders. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

If you want to know some of the risks facing Puncak Niaga Holdings Berhad we've found 3 warning signs (2 can't be ignored!) that you should be aware of before investing here.

While Puncak Niaga Holdings Berhad 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.