There's Been No Shortage Of Growth Recently For Perdana Petroleum Berhad's (KLSE:PERDANA) Returns On Capital

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. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. So when we looked at Perdana Petroleum Berhad (KLSE:PERDANA) and its trend of ROCE, we really liked what we saw.

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Understanding 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. To calculate this metric for Perdana Petroleum Berhad, this is the formula:

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

0.07 = RM58m ÷ (RM896m - RM64m) (Based on the trailing twelve months to September 2025).

Thus, Perdana Petroleum Berhad has an ROCE of 7.0%. Ultimately, that's a low return and it under-performs the Energy Services industry average of 8.9%.

See our latest analysis for Perdana Petroleum Berhad

Historical performance is a great place to start when researching a stock so above you can see the gauge for Perdana Petroleum Berhad's ROCE against it's prior returns. If you're interested in investigating Perdana Petroleum Berhad's past further, check out this free graph covering Perdana Petroleum Berhad's past earnings, revenue and cash flow.

So How Is Perdana Petroleum Berhad's ROCE Trending?

We're delighted to see that Perdana Petroleum Berhad is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but now it's turned around, earning 7.0% which is no doubt a relief for some early shareholders. In regards to capital employed, Perdana Petroleum Berhad is using 25% less capital than it was five years ago, which on the surface, can indicate that the business has become more efficient at generating these returns. The reduction could indicate that the company is selling some assets, and considering returns are up, they appear to be selling the right ones.

Our Take On Perdana Petroleum Berhad's ROCE

In a nutshell, we're pleased to see that Perdana Petroleum Berhad has been able to generate higher returns from less capital. Investors may not be impressed by the favorable underlying trends yet because over the last five years the stock has only returned 3.2% to shareholders. So exploring more about this stock could uncover a good opportunity, if the valuation and other metrics stack up.

If you want to continue researching Perdana Petroleum Berhad, you might be interested to know about the 2 warning signs that our analysis has discovered.

While Perdana Petroleum 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.