Investors Met With Slowing Returns on Capital At Okumura (TSE:1833)

If you're looking for a multi-bagger, there's a few things to keep an eye out for. Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. However, after briefly looking over the numbers, we don't think Okumura (TSE:1833) has the makings of a multi-bagger going forward, but let's have a look at why that may be.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

Understanding Return On Capital Employed (ROCE)

For those who don't know, ROCE is a measure of a company's yearly pre-tax profit (its return), relative to the capital employed in the business. Analysts use this formula to calculate it for Okumura:

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

0.058 = JP¥14b ÷ (JP¥379b - JP¥144b) (Based on the trailing twelve months to June 2025).

Thus, Okumura has an ROCE of 5.8%. In absolute terms, that's a low return and it also under-performs the Construction industry average of 10%.

See our latest analysis for Okumura

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

So How Is Okumura's ROCE Trending?

The returns on capital haven't changed much for Okumura in recent years. Over the past five years, ROCE has remained relatively flat at around 5.8% and the business has deployed 28% more capital into its operations. This poor ROCE doesn't inspire confidence right now, and with the increase in capital employed, it's evident that the business isn't deploying the funds into high return investments.

Our Take On Okumura's ROCE

Long story short, while Okumura has been reinvesting its capital, the returns that it's generating haven't increased. Yet to long term shareholders the stock has gifted them an incredible 180% return in the last five years, so the market appears to be rosy about its future. Ultimately, if the underlying trends persist, we wouldn't hold our breath on it being a multi-bagger going forward.

If you'd like to know more about Okumura, we've spotted 4 warning signs, and 2 of them are concerning.

While Okumura isn't earning the highest return, check out this free list of companies that are earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.