PGF Capital Berhad (KLSE:PGF) Is Experiencing Growth In Returns On Capital

Yahoo

23-02-2025

There are a few key trends to look for if we want to identify the next multi-bagger. 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. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at PGF Capital Berhad (KLSE:PGF) and its trend of ROCE, we really liked what we saw.
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 PGF Capital Berhad, this is the formula:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.091 = RM29m ÷ (RM351m - RM37m) (Based on the trailing twelve months to November 2024).
Therefore, PGF Capital Berhad has an ROCE of 9.1%. In absolute terms, that's a low return, but it's much better than the Building industry average of 7.0%.
View our latest analysis for PGF Capital Berhad
In the above chart we have measured PGF Capital Berhad's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering PGF Capital Berhad for free.
While in absolute terms it isn't a high ROCE, it's promising to see that it has been moving in the right direction. Over the last five years, returns on capital employed have risen substantially to 9.1%. The company is effectively making more money per dollar of capital used, and it's worth noting that the amount of capital has increased too, by 47%. 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.
All in all, it's terrific to see that PGF Capital Berhad is reaping the rewards from prior investments and is growing its capital base. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. Therefore, we think it would be worth your time to check if these trends are going to continue.
One more thing to note, we've identified 2 warning signs with PGF Capital Berhad and understanding these should be part of your investment process.
While PGF Capital 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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