The Returns At COMSYS Holdings (TSE:1721) Aren't Growing

There are a few key trends to look for if we want to identify the next multi-bagger. Firstly, we'll want to see a proven return on capital employed (ROCE) that is increasing, and secondly, an expanding base of capital employed. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Although, when we looked at COMSYS Holdings (TSE:1721), it didn't seem to tick all of these boxes.

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. The formula for this calculation on COMSYS Holdings is:

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

0.099 = JP¥37b ÷ (JP¥498b - JP¥122b) (Based on the trailing twelve months to December 2023).

Therefore, COMSYS Holdings has an ROCE of 9.9%. In absolute terms, that's a low return, but it's much better than the Construction industry average of 7.6%.

See our latest analysis for COMSYS Holdings

In the above chart we have measured COMSYS Holdings' prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering COMSYS Holdings for free.

What The Trend Of ROCE Can Tell Us

There hasn't been much to report for COMSYS Holdings' returns and its level of capital employed because both metrics have been steady for the past five years. It's not uncommon to see this when looking at a mature and stable business that isn't re-investing its earnings because it has likely passed that phase of the business cycle. So don't be surprised if COMSYS Holdings doesn't end up being a multi-bagger in a few years time.

The Bottom Line On COMSYS Holdings' ROCE

In summary, COMSYS Holdings isn't compounding its earnings but is generating stable returns on the same amount of capital employed. Unsurprisingly, the stock has only gained 37% over the last five years, which potentially indicates that investors are accounting for this going forward. Therefore, if you're looking for a multi-bagger, we'd propose looking at other options.

COMSYS Holdings could be trading at an attractive price in other respects, so you might find our free intrinsic value estimation for 1721 on our platform quite valuable.

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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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.