The Return Trends At Techno Ryowa (TSE:1965) Look Promising

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. So when we looked at Techno Ryowa (TSE:1965) and its trend of ROCE, we really liked what we saw.

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Return On Capital Employed (ROCE): What Is It?

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 Techno Ryowa, this is the formula:

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

0.17 = JP¥9.6b ÷ (JP¥80b - JP¥24b) (Based on the trailing twelve months to March 2025).

Therefore, Techno Ryowa has an ROCE of 17%. In absolute terms, that's a satisfactory return, but compared to the Construction industry average of 9.2% it's much better.

View our latest analysis for Techno Ryowa

Historical performance is a great place to start when researching a stock so above you can see the gauge for Techno Ryowa's ROCE against it's prior returns. If you'd like to look at how Techno Ryowa has performed in the past in other metrics, you can view this free graph of Techno Ryowa's past earnings, revenue and cash flow.

How Are Returns Trending?

Techno Ryowa is displaying some positive trends. Over the last five years, returns on capital employed have risen substantially to 17%. Basically the business is earning more per dollar of capital invested and in addition to that, 40% more capital is being employed now too. So we're very much inspired by what we're seeing at Techno Ryowa thanks to its ability to profitably reinvest capital.

In Conclusion...

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 Techno Ryowa has. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. In light of that, we think it's worth looking further into this stock because if Techno Ryowa can keep these trends up, it could have a bright future ahead.

One more thing, we've spotted 1 warning sign facing Techno Ryowa that you might find interesting.

While Techno Ryowa 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.