Returns On Capital Are Showing Encouraging Signs At Raffles Education (SGX:NR7)

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, we've noticed some promising trends at Raffles Education (SGX:NR7) so let's look a bit deeper.

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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 Raffles Education:

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

0.012 = S$9.5m ÷ (S$1.0b - S$210m) (Based on the trailing twelve months to June 2025).

So, Raffles Education has an ROCE of 1.2%. Ultimately, that's a low return and it under-performs the Consumer Services industry average of 11%.

Check out our latest analysis for Raffles Education

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

The Trend Of ROCE

Raffles Education has broken into the black (profitability) and we're sure it's a sight for sore eyes. The company now earns 1.2% on its capital, because five years ago it was incurring losses. Interestingly, the capital employed by the business has remained relatively flat, so these higher returns are either from prior investments paying off or increased efficiencies. 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 On Raffles Education's ROCE

In summary, we're delighted to see that Raffles Education has been able to increase efficiencies and earn higher rates of return on the same amount of capital. And since the stock has fallen 19% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

On a final note, we've found 2 warning signs for Raffles Education that we think you should be aware of.

While Raffles Education 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.