The Return Trends At Daihatsu Infinearth Mfg.Co.Ltd (TSE:6023) 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. Basically this means that a company has profitable initiatives that it can continue to reinvest in, which is a trait of a compounding machine. Speaking of which, we noticed some great changes in Daihatsu Infinearth Mfg.Co.Ltd's (TSE:6023) 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. The formula for this calculation on Daihatsu Infinearth Mfg.Co.Ltd is:

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

0.12 = JP¥7.6b ÷ (JP¥96b - JP¥32b) (Based on the trailing twelve months to March 2025).

Therefore, Daihatsu Infinearth Mfg.Co.Ltd has an ROCE of 12%. In absolute terms, that's a satisfactory return, but compared to the Machinery industry average of 8.1% it's much better.

Check out 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 to see what analysts are forecasting going forward, you should check out our free analyst report for Daihatsu Infinearth Mfg.Co.Ltd .

What Does the ROCE Trend For Daihatsu Infinearth Mfg.Co.Ltd Tell Us?

Daihatsu Infinearth Mfg.Co.Ltd has not disappointed with their ROCE growth. Looking at the data, we can see that even though capital employed in the business has remained relatively flat, the ROCE generated has risen by 171% over the last five years. 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. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

In Conclusion...

As discussed above, Daihatsu Infinearth Mfg.Co.Ltd appears to be getting more proficient at generating returns since capital employed has remained flat but earnings (before interest and tax) are up. And with the stock having performed exceptionally well over the last five years, these patterns are being accounted for by investors. With that being said, we still think the promising fundamentals mean the company deserves some further due diligence.

If you'd like to know more about Daihatsu Infinearth Mfg.Co.Ltd, we've spotted 2 warning signs, and 1 of them shouldn't be ignored.

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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.