There's Been No Shortage Of Growth Recently For Econpile Holdings Berhad's (KLSE:ECONBHD) Returns On Capital

If we want to find a potential multi-bagger, often there are underlying trends that can provide clues. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. With that in mind, we've noticed some promising trends at Econpile Holdings Berhad (KLSE:ECONBHD) so let's look a bit deeper.

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Understanding Return On Capital Employed (ROCE)

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 Econpile Holdings Berhad is:

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

0.025 = RM9.5m ÷ (RM608m - RM234m) (Based on the trailing twelve months to September 2025).

Thus, Econpile Holdings Berhad has an ROCE of 2.5%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 10%.

View our latest analysis for Econpile Holdings Berhad

In the above chart we have measured Econpile Holdings Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Econpile Holdings Berhad .

What The Trend Of ROCE Can Tell Us

While there are companies with higher returns on capital out there, we still find the trend at Econpile Holdings Berhad promising. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 70% over the last five years. So it's likely that the business is now reaping the full benefits of its past investments, since the capital employed hasn't changed considerably. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

In Conclusion...

In summary, we're delighted to see that Econpile Holdings Berhad has been able to increase efficiencies and earn higher rates of return on the same amount of capital. Astute investors may have an opportunity here because the stock has declined 43% in the last five years. With that in mind, we believe the promising trends warrant this stock for further investigation.

One more thing to note, we've identified 1 warning sign with Econpile Holdings Berhad and understanding it should be part of your investment process.

While Econpile 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.