Will Tenryu Saw Mfg (TYO:5945) Multiply In Value Going Forward?

If you're looking for a multi-bagger, there's a few things to keep an eye out for. In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. In light of that, when we looked at Tenryu Saw Mfg (TYO:5945) and its ROCE trend, we weren't exactly thrilled.

What is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Tenryu Saw Mfg, this is the formula:

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

0.045 = JP¥1.3b ÷ (JP¥29b - JP¥1.3b) (Based on the trailing twelve months to September 2020).

Thus, Tenryu Saw Mfg has an ROCE of 4.5%. In absolute terms, that's a low return and it also under-performs the Machinery industry average of 6.7%.

Check out our latest analysis for Tenryu Saw Mfg

While the past is not representative of the future, it can be helpful to know how a company has performed historically, which is why we have this chart above. If you'd like to look at how Tenryu Saw Mfg has performed in the past in other metrics, you can view this free graph of past earnings, revenue and cash flow.

What Can We Tell From Tenryu Saw Mfg's ROCE Trend?

Over the past five years, Tenryu Saw Mfg's ROCE and capital employed have both remained mostly flat. This tells us the company isn't reinvesting in itself, so it's plausible that it's past the growth phase. So unless we see a substantial change at Tenryu Saw Mfg in terms of ROCE and additional investments being made, we wouldn't hold our breath on it being a multi-bagger.

In Conclusion...

We can conclude that in regards to Tenryu Saw Mfg's returns on capital employed and the trends, there isn't much change to report on. And with the stock having returned a mere 37% in the last five years to shareholders, you could argue that they're aware of these lackluster trends. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

If you want to continue researching Tenryu Saw Mfg, you might be interested to know about the 1 warning sign that our analysis has discovered.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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