Daihatsu Infinearth Mfg.Co.Ltd (TSE:6023) Shareholders Will Want The ROCE Trajectory To Continue

To find a multi-bagger stock, what are the underlying trends we should look for in a business? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount 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. So on that note, Daihatsu Infinearth Mfg.Co.Ltd (TSE:6023) looks quite promising in regards to its trends of return on capital.

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

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. Analysts use this formula to calculate it for Daihatsu Infinearth Mfg.Co.Ltd:

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

0.12 = JP¥7.6b ÷ (JP¥97b - JP¥33b) (Based on the trailing twelve months to June 2025).

Therefore, Daihatsu Infinearth Mfg.Co.Ltd has an ROCE of 12%. On its own, that's a standard return, however it's much better than the 8.6% generated by the Machinery industry.

See our latest analysis for Daihatsu Infinearth Mfg.Co.Ltd

Above you can see how the current ROCE for Daihatsu Infinearth Mfg.Co.Ltd 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 Daihatsu Infinearth Mfg.Co.Ltd for free.

What The Trend Of ROCE Can Tell Us

Daihatsu Infinearth Mfg.Co.Ltd's ROCE growth is quite impressive. More specifically, while the company has kept capital employed relatively flat over the last five years, the ROCE has climbed 170% in that same time. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. The company is doing well in that sense, and it's worth investigating what the management team has planned for long term growth prospects.

The Bottom Line

To bring it all together, Daihatsu Infinearth Mfg.Co.Ltd has done well to increase the returns it's generating from its capital employed. Since the stock has returned a staggering 807% to shareholders over the last five years, it looks like investors are recognizing these changes. 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.

If you want to continue researching Daihatsu Infinearth Mfg.Co.Ltd, you might be interested to know about the 1 warning sign that our analysis has discovered.

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

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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.