Topvision Eye Specialist Berhad (KLSE:TOPVISN) Might Be Having Difficulty Using Its Capital Effectively
To find a multi-bagger stock, what are the underlying trends we should look for in a business? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's 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. Although, when we looked at Topvision Eye Specialist Berhad (KLSE:TOPVISN), it didn't seem to tick all of these boxes.
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 Topvision Eye Specialist Berhad is:
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)
0.04 = RM2.9m ÷ (RM77m - RM4.9m) (Based on the trailing twelve months to September 2025).
So, Topvision Eye Specialist Berhad has an ROCE of 4.0%. Ultimately, that's a low return and it under-performs the Healthcare industry average of 11%.
Check out our latest analysis for Topvision Eye Specialist Berhad
Historical performance is a great place to start when researching a stock so above you can see the gauge for Topvision Eye Specialist Berhad's ROCE against it's prior returns. If you want to delve into the historical earnings , check out these free graphs detailing revenue and cash flow performance of Topvision Eye Specialist Berhad.
The Trend Of ROCE
In terms of Topvision Eye Specialist Berhad's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 4.0% from 9.2% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It may take some time before the company starts to see any change in earnings from these investments.
The Bottom Line
In summary, Topvision Eye Specialist Berhad is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And investors appear hesitant that the trends will pick up because the stock has fallen 26% in the last year. Therefore based on the analysis done in this article, we don't think Topvision Eye Specialist Berhad has the makings of a multi-bagger.
Topvision Eye Specialist Berhad does have some risks, we noticed 3 warning signs (and 2 which are potentially serious) we think you should know about.
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.
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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.