Investors Will Want Tomei Consolidated Berhad's (KLSE:TOMEI) Growth In ROCE To Persist
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. 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. Put simply, these types of businesses are compounding machines, meaning they are continually reinvesting their earnings at ever-higher rates of return. Speaking of which, we noticed some great changes in Tomei Consolidated Berhad's (KLSE:TOMEI) returns on capital, so let's have a look.
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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. Analysts use this formula to calculate it for Tomei Consolidated Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.17 = RM105m ÷ (RM878m - RM254m) (Based on the trailing twelve months to March 2025).
So, Tomei Consolidated Berhad has an ROCE of 17%. On its own, that's a standard return, however it's much better than the 14% generated by the Specialty Retail industry.
Check out our latest analysis for Tomei Consolidated Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Tomei Consolidated Berhad's ROCE against it's prior returns. If you'd like to look at how Tomei Consolidated Berhad has performed in the past in other metrics, you can view this free graph of Tomei Consolidated Berhad's past earnings, revenue and cash flow.
Tomei Consolidated Berhad is displaying some positive trends. The data shows that returns on capital have increased substantially over the last five years to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 172% more capital is being employed now too. This can indicate that there's plenty of opportunities to invest capital internally and at ever higher rates, a combination that's common among multi-baggers.
In another part of our analysis, we noticed that the company's ratio of current liabilities to total assets decreased to 29%, which broadly means the business is relying less on its suppliers or short-term creditors to fund its operations. This tells us that Tomei Consolidated Berhad has grown its returns without a reliance on increasing their current liabilities, which we're very happy with.
A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what Tomei Consolidated Berhad has. Since the stock has returned a staggering 323% to shareholders over the last five years, it looks like investors are recognizing these changes. In light of that, we think it's worth looking further into this stock because if Tomei Consolidated Berhad can keep these trends up, it could have a bright future ahead.
If you want to know some of the risks facing Tomei Consolidated Berhad we've found 3 warning signs (1 can't be ignored!) that you should be aware of before investing here.
While Tomei Consolidated 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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Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.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.
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