Rimbaco Group Global (HKG:1953) Will Be Looking To Turn Around Its Returns

What underlying fundamental trends can indicate that a company might be in decline? When we see a declining return on capital employed (ROCE) in conjunction with a declining base of capital employed, that's often how a mature business shows signs of aging. Trends like this ultimately mean the business is reducing its investments and also earning less on what it has invested. So after we looked into Rimbaco Group Global (HKG:1953), the trends above didn't look too great.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

What Is Return On Capital Employed (ROCE)?

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. The formula for this calculation on Rimbaco Group Global is:

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

0.018 = RM2.8m ÷ (RM249m - RM93m) (Based on the trailing twelve months to April 2025).

Thus, Rimbaco Group Global has an ROCE of 1.8%. Ultimately, that's a low return and it under-performs the Construction industry average of 5.0%.

See our latest analysis for Rimbaco Group Global

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

The Trend Of ROCE

There is reason to be cautious about Rimbaco Group Global, given the returns are trending downwards. Unfortunately the returns on capital have diminished from the 14% that they were earning five years ago. And on the capital employed front, the business is utilizing roughly the same amount of capital as it was back then. This combination can be indicative of a mature business that still has areas to deploy capital, but the returns received aren't as high due potentially to new competition or smaller margins. So because these trends aren't typically conducive to creating a multi-bagger, we wouldn't hold our breath on Rimbaco Group Global becoming one if things continue as they have.

What We Can Learn From Rimbaco Group Global's ROCE

In summary, it's unfortunate that Rimbaco Group Global is generating lower returns from the same amount of capital. But investors must be expecting an improvement of sorts because over the last five yearsthe stock has delivered a respectable 53% return. In any case, the current underlying trends don't bode well for long term performance so unless they reverse, we'd start looking elsewhere.

Rimbaco Group Global does come with some risks though, we found 3 warning signs in our investment analysis, and 2 of those are significant...

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.

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.