Rimbaco Group Global (HKG:1953) Will Be Looking To Turn Around Its Returns
Rimbaco Group Global (HKG:1953) is facing declining returns, with a Return on Capital Employed (ROCE) of 1.8%, significantly below the industry average of 5.0%. Over the past five years, ROCE has decreased from 14%, indicating potential maturity and reduced investment returns. Despite a 53% stock return in the same period, current trends suggest caution for long-term performance. Investors should be aware of three warning signs identified in the analysis, two of which are significant.
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.
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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...
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