Returns Are Gaining Momentum At SHO-BOND HoldingsLtd (TSE:1414)

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? 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. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. Speaking of which, we noticed some great changes in SHO-BOND HoldingsLtd's (TSE:1414) returns on capital, so let's have a look.

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Understanding 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. The formula for this calculation on SHO-BOND HoldingsLtd is:

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

0.19 = JP¥20b ÷ (JP¥124b - JP¥19b) (Based on the trailing twelve months to March 2025).

Thus, SHO-BOND HoldingsLtd has an ROCE of 19%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 9.2% it's much better.

See our latest analysis for SHO-BOND HoldingsLtd

Above you can see how the current ROCE for SHO-BOND HoldingsLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for SHO-BOND HoldingsLtd .

What Can We Tell From SHO-BOND HoldingsLtd's ROCE Trend?

Investors would be pleased with what's happening at SHO-BOND HoldingsLtd. The numbers show that in the last five years, the returns generated on capital employed have grown considerably to 19%. The amount of capital employed has increased too, by 28%. The increasing returns on a growing amount of capital is common amongst multi-baggers and that's why we're impressed.

The Key Takeaway

A company that is growing its returns on capital and can consistently reinvest in itself is a highly sought after trait, and that's what SHO-BOND HoldingsLtd has. Considering the stock has delivered 9.6% to its stockholders over the last five years, it may be fair to think that investors aren't fully aware of the promising trends yet. Given that, we'd look further into this stock in case it has more traits that could make it multiply in the long term.

While SHO-BOND HoldingsLtd looks impressive, no company is worth an infinite price. The intrinsic value infographic for 1414 helps visualize whether it is currently trading for a fair price.

While SHO-BOND HoldingsLtd may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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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.