Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. If you see this, it typically means it’s a company with a great business model and plenty of profitable reinvestment opportunities. Having said that, from a first glance at Riverview Rubber Estates Berhad (KLSE:RVIEW) we aren’t jumping out of our chairs at how returns are trending, but let’s have a deeper look.
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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. The formula for this calculation on Riverview Rubber Estates Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.03 = RM12m ÷ (RM405m – RM4.2m) (Based on the trailing twelve months to June 2025).
Thus, Riverview Rubber Estates Berhad has an ROCE of 3.0%. In absolute terms, that’s a low return and it also under-performs the Food industry average of 9.8%.
View our latest analysis for Riverview Rubber Estates 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 Riverview Rubber Estates Berhad’s past further, check out this free graph covering Riverview Rubber Estates Berhad’s past earnings, revenue and cash flow.
In terms of Riverview Rubber Estates Berhad’s historical ROCE trend, it doesn’t exactly demand attention. Over the past five years, ROCE has remained relatively flat at around 3.0% and the business has deployed 32% more capital into its operations. This poor ROCE doesn’t inspire confidence right now, and with the increase in capital employed, it’s evident that the business isn’t deploying the funds into high return investments.
In conclusion, Riverview Rubber Estates Berhad has been investing more capital into the business, but returns on that capital haven’t increased. Since the stock has gained an impressive 44% over the last five years, investors must think there’s better things to come. However, unless these underlying trends turn more positive, we wouldn’t get our hopes up too high.