30-04-2025
Returns On Capital At Dominant Enterprise Berhad (KLSE:DOMINAN) Have Stalled
If you're looking for a multi-bagger, there's a few things to keep an eye out for. 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. However, after briefly looking over the numbers, we don't think Dominant Enterprise Berhad (KLSE:DOMINAN) has the makings of a multi-bagger going forward, but let's have a look at why that may be.
We've discovered 2 warning signs about Dominant Enterprise Berhad. View them for free.
If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Dominant Enterprise Berhad:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.093 = RM39m ÷ (RM687m - RM265m) (Based on the trailing twelve months to December 2024).
Therefore, Dominant Enterprise Berhad has an ROCE of 9.3%. On its own that's a low return, but compared to the average of 2.4% generated by the Forestry industry, it's much better.
Check out our latest analysis for Dominant Enterprise 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 want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Dominant Enterprise Berhad.
In terms of Dominant Enterprise Berhad's historical ROCE trend, it doesn't exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 9.3% and the business has deployed 39% more capital into its operations. Given the company has increased the amount of capital employed, it appears the investments that have been made simply don't provide a high return on capital.
In summary, Dominant Enterprise Berhad has simply been reinvesting capital and generating the same low rate of return as before. And with the stock having returned a mere 34% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. So if you're looking for a multi-bagger, the underlying trends indicate you may have better chances elsewhere.
One more thing to note, we've identified 2 warning signs with Dominant Enterprise Berhad and understanding them should be part of your investment process.
While Dominant Enterprise 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) 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.
