Returns on Capital Paint A Bright Future For Kencana Agri (SGX:BNE)

What are the early trends we should look for to identify a stock that could 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. And in light of that, the trends we're seeing at Kencana Agri's (SGX:BNE) look very promising so lets take a look.

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Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. The formula for this calculation on Kencana Agri is:

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

0.24 = US$46m ÷ (US$290m - US$96m) (Based on the trailing twelve months to June 2025).

Therefore, Kencana Agri has an ROCE of 24%. In absolute terms that's a great return and it's even better than the Food industry average of 13%.

Check out our latest analysis for Kencana Agri

Above you can see how the current ROCE for Kencana Agri compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Kencana Agri .

So How Is Kencana Agri's ROCE Trending?

Kencana Agri's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 107% in that same time. So our take on this is that the business has increased efficiencies to generate these higher returns, all the while not needing to make any additional investments. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

What We Can Learn From Kencana Agri's ROCE

In summary, we're delighted to see that Kencana Agri has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Since the stock has returned a staggering 231% to shareholders over the last five years, it looks like investors are recognizing these changes. Therefore, we think it would be worth your time to check if these trends are going to continue.

Kencana Agri does have some risks though, and we've spotted 3 warning signs for Kencana Agri that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.