When researching a stock for investment, what can tell us that the company is 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. This reveals that the company isn't compounding shareholder wealth because returns are falling and its net asset base is shrinking. In light of that, from a first glance at DFI Retail Group Holdings (SGX:D01), we've spotted some signs that it could be struggling, so let's investigate.

We've discovered 2 warning signs about DFI Retail Group Holdings. View them for free.

Return On Capital Employed (ROCE): What Is It?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. To calculate this metric for DFI Retail Group Holdings, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.063 = US$199m ÷ (US$7.3b - US$4.1b) (Based on the trailing twelve months to December 2024).

Thus, DFI Retail Group Holdings has an ROCE of 6.3%.  In absolute terms, that's a low return and it also under-performs the Consumer Retailing industry average of 8.4%.

Check out our latest analysis for DFI Retail Group Holdings SGX:D01 Return on Capital Employed April 23rd 2025

In the above chart we have measured DFI Retail Group Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for DFI Retail Group Holdings .

What Can We Tell From DFI Retail Group Holdings' ROCE Trend?

In terms of DFI Retail Group Holdings' historical ROCE trend, it isn't fantastic. Unfortunately, returns have declined substantially over the last five years to the 6.3% we see today. In addition to that, DFI Retail Group Holdings is now employing 24% less capital than it was five years ago. When you see both ROCE and capital employed diminishing, it can often be a sign of a mature and shrinking business that might be in structural decline. Typically businesses that exhibit these characteristics aren't the ones that tend to multiply over the long term, because statistically speaking, they've already gone through the growth phase of their life cycle.

On a separate but related note, it's important to know that DFI Retail Group Holdings has a current liabilities to total assets ratio of 56%, which we'd consider pretty high. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. While it's not necessarily a bad thing, it can be beneficial if this ratio is lower.

Story Continues

In Conclusion...

In summary, it's unfortunate that DFI Retail Group Holdings is shrinking its capital base and also generating lower returns. It should come as no surprise then that the stock has fallen 39% over the last five years, so it looks like investors are recognizing these changes. Unless there is a shift to a more positive trajectory in these metrics, we would look elsewhere.

DFI Retail Group Holdings does have some risks, we noticed  2 warning signs  (and 1 which is a bit unpleasant)  we think you should know about.

While DFI Retail Group Holdings isn't earning the highest return, check out this freelist of companies that are earning high returns on equity with solid balance sheets.

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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.

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