Nasdaq
华尔街日报Returns On Capital Signal Tricky Times Ahead For OB Holdings Berhad (KLSE:OBHB)
To find a multi-bagger stock, what are the underlying trends we should look for in a business? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing 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. In light of that, when we looked at OB Holdings Berhad (KLSE:OBHB) and its ROCE trend, we weren't exactly thrilled.
What Is Return On Capital Employed (ROCE)?
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. The formula for this calculation on OB Holdings Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.10 = RM6.7m ÷ (RM75m - RM9.0m) (Based on the trailing twelve months to August 2025).
So, OB Holdings Berhad has an ROCE of 10%. That's a pretty standard return and it's in line with the industry average of 10%.
See our latest analysis for OB Holdings Berhad
While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you're interested in investigating OB Holdings Berhad's past further, check out this free graph covering OB Holdings Berhad's past earnings, revenue and cash flow.
So How Is OB Holdings Berhad's ROCE Trending?
When we looked at the ROCE trend at OB Holdings Berhad, we didn't gain much confidence. Over the last four years, returns on capital have decreased to 10% from 32% four years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line.
On a related note, OB Holdings Berhad has decreased its current liabilities to 12% of total assets. So we could link some of this to the decrease in ROCE. Effectively this means their suppliers or short-term creditors are funding less of the business, which reduces some elements of risk. Since the business is basically funding more of its operations with it's own money, you could argue this has made the business less efficient at generating ROCE.
What We Can Learn From OB Holdings Berhad's ROCE
To conclude, we've found that OB Holdings Berhad is reinvesting in the business, but returns have been falling. And investors appear hesitant that the trends will pick up because the stock has fallen 20% in the last year. All in all, the inherent trends aren't typical of multi-baggers, so if that's what you're after, we think you might have more luck elsewhere.
One more thing: We've identified 2 warning signs with OB Holdings Berhad (at least 1 which doesn't sit too well with us) , and understanding these would certainly be useful.
If you want to search for solid companies with great earnings, check out this free list of companies with good balance sheets and impressive returns on equity.
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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.