Caution: GDB Holdings Berhad And Capital Returns

To find a great investment opportunity, watch out for a few things. First, look for a company that invests more and earns more. This means the company can use its earnings to make higher returns in the future. However, GDB Holdings Berhad (KLSE:GDB) doesn't seem to be doing great at first glance. Let's look closer.

ROCE: Understanding Capital Efficiency

ROCE measures a company's yearly pre-tax profit compared to the capital invested. To find GDB Holdings Berhad's ROCE, use this formula:

The Return on Capital Employed formula is: EBIT divided by the difference between Total Assets and Current Liabilities.

The equation is for 0.06. It equals RM9.7m divided by RM336m minus RM174m. It's based on the past twelve months until March 2023.

GDB Holdings Berhad has a 6.0% ROCE. It's low, but the industry average is around 5.5%.

Take a look at our newest analysis for GDB Holdings Berhad.

To learn about a stock, historical performance is a good starting point. You can see GDB Holdings Berhad's ROCE and past returns in the chart. If you want to view other metrics like earnings, revenue, and cash flow, you can check out the free graph.

ROCE Trending Now!

GDB Holdings Berhad's ROCE trend is not good. In the past five years, ROCE has gone down from 55%. They used more capital but revenue went down. This is a warning sign. They could be trying to grow but they are losing market share because sales are not going up. Beware.

GDB Holdings has paid off a lot of its debts. This means that its ROCE has gone down. The company is relying less on short-term creditors or suppliers to fund its operations. This reduces some risks. But the business now has to use more of its own money. This means it's not as efficient at generating ROCE. The debt level is still kind of high, so there are still some risks.

We're worried about GDB Holdings Berhad. They put more money into the business, but sales and returns fell. People who have owned the stock for 5 years have lost 14% of their investment. This could mean that the market doesn't like these trends. We think it's best to look elsewhere.

GDB Holdings Berhad has risks. We found 4 warning signs and 1 that's important to know.

GDB Holdings Berhad isn't making the highest returns right now. But, we put together a list of companies that earn over 25% return on equity. You can see the list for free here.

Do you have any thoughts on this article? Worried about the information it contains? Contact us directly or email editorial-team (at) simplywallst.com.

This blog post is from Simply Wall St. We talk about old data and predictions using a fair approach. But, we don't give financial advice. This isn't telling you to buy or sell stocks. We write about the long-term and important information. However, we might miss the newest announcements or factors. Lastly, we don't have any stock positions to mention.

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