The Return Trends At Institute for Q-shu Pioneers of Space (TSE:5595) 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. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base 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. Speaking of which, we noticed some great changes in Institute for Q-shu Pioneers of Space's (TSE:5595) returns on capital, so let's have a look.

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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 Institute for Q-shu Pioneers of Space, this is the formula:

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

0.0043 = JP¥86m ÷ (JP¥24b - JP¥3.7b) (Based on the trailing twelve months to May 2025).

So, Institute for Q-shu Pioneers of Space has an ROCE of 0.4%. In absolute terms, that's a low return and it also under-performs the Aerospace & Defense industry average of 7.4%.

See our latest analysis for Institute for Q-shu Pioneers of Space

Above you can see how the current ROCE for Institute for Q-shu Pioneers of Space compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering Institute for Q-shu Pioneers of Space for free.

How Are Returns Trending?

The fact that Institute for Q-shu Pioneers of Space is now generating some pre-tax profits from its prior investments is very encouraging. Shareholders would no doubt be pleased with this because the business was loss-making three years ago but is is now generating 0.4% on its capital. And unsurprisingly, like most companies trying to break into the black, Institute for Q-shu Pioneers of Space is utilizing 261% more capital than it was three years ago. We like this trend, because it tells us the company has profitable reinvestment opportunities available to it, and if it continues going forward that can lead to a multi-bagger performance.

For the record though, there was a noticeable increase in the company's current liabilities over the period, so we would attribute some of the ROCE growth to that. Essentially the business now has suppliers or short-term creditors funding about 16% of its operations, which isn't ideal. It's worth keeping an eye on this because as the percentage of current liabilities to total assets increases, some aspects of risk also increase.

The Bottom Line On Institute for Q-shu Pioneers of Space's ROCE

Overall, Institute for Q-shu Pioneers of Space gets a big tick from us thanks in most part to the fact that it is now profitable and is reinvesting in its business. And with a respectable 26% awarded to those who held the stock over the last year, you could argue that these developments are starting to get the attention they deserve. So given the stock has proven it has promising trends, it's worth researching the company further to see if these trends are likely to persist.

Institute for Q-shu Pioneers of Space does have some risks, we noticed 2 warning signs (and 1 which is significant) we think you should know about.

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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.