Yasunaga (TSE:7271) Is Doing The Right Things To Multiply Its Share Price

If you're not sure where to start when looking for the next multi-bagger, there are a few key trends you should keep an eye out for. 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. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Yasunaga's (TSE:7271) returns on capital, so let's have a look.

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What Is Return On Capital Employed (ROCE)?

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. Analysts use this formula to calculate it for Yasunaga:

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

0.057 = JP¥1.1b ÷ (JP¥35b - JP¥15b) (Based on the trailing twelve months to June 2025).

Therefore, Yasunaga has an ROCE of 5.7%. In absolute terms, that's a low return and it also under-performs the Auto Components industry average of 7.6%.

View our latest analysis for Yasunaga

Historical performance is a great place to start when researching a stock so above you can see the gauge for Yasunaga's ROCE against it's prior returns. If you're interested in investigating Yasunaga's past further, check out this free graph covering Yasunaga's past earnings, revenue and cash flow.

What Can We Tell From Yasunaga's ROCE Trend?

We're delighted to see that Yasunaga is reaping rewards from its investments and has now broken into profitability. The company was generating losses five years ago, but has managed to turn it around and as we saw earlier is now earning 5.7%, which is always encouraging. On top of that, what's interesting is that the amount of capital being employed has remained steady, so the business hasn't needed to put any additional money to work to generate these higher returns. That being said, while an increase in efficiency is no doubt appealing, it'd be helpful to know if the company does have any investment plans going forward. After all, a company can only become a long term multi-bagger if it continually reinvests in itself at high rates of return.

Another thing to note, Yasunaga has a high ratio of current liabilities to total assets of 44%. 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. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

In Conclusion...

To bring it all together, Yasunaga has done well to increase the returns it's generating from its capital employed. And since the stock has fallen 10% over the last five years, there might be an opportunity here. With that in mind, we believe the promising trends warrant this stock for further investigation.

If you'd like to know more about Yasunaga, we've spotted 3 warning signs, and 2 of them are potentially serious.

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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.