Here's What Moriya Transportation Engineering and ManufacturingLtd's (TSE:6226) Strong Returns On Capital Mean

Did you know there are some financial metrics that can provide clues of a potential multi-bagger? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at Moriya Transportation Engineering and ManufacturingLtd (TSE:6226), we liked what we saw.

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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. The formula for this calculation on Moriya Transportation Engineering and ManufacturingLtd is:

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

0.36 = JP¥4.9b ÷ (JP¥19b - JP¥5.0b) (Based on the trailing twelve months to September 2025).

So, Moriya Transportation Engineering and ManufacturingLtd has an ROCE of 36%. In absolute terms that's a great return and it's even better than the Machinery industry average of 8.0%.

View our latest analysis for Moriya Transportation Engineering and ManufacturingLtd

In the above chart we have measured Moriya Transportation Engineering and ManufacturingLtd's prior ROCE against its prior performance, but the future is arguably more important. If you're interested, you can view the analysts predictions in our free analyst report for Moriya Transportation Engineering and ManufacturingLtd .

So How Is Moriya Transportation Engineering and ManufacturingLtd's ROCE Trending?

It's hard not to be impressed by Moriya Transportation Engineering and ManufacturingLtd's returns on capital. The company has consistently earned 36% for the last five years, and the capital employed within the business has risen 185% in that time. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. You'll see this when looking at well operated businesses or favorable business models.

One more thing to note, even though ROCE has remained relatively flat over the last five years, the reduction in current liabilities to 27% of total assets, is good to see from a business owner's perspective. Effectively suppliers now fund less of the business, which can lower some elements of risk.

Our Take On Moriya Transportation Engineering and ManufacturingLtd's ROCE

Moriya Transportation Engineering and ManufacturingLtd has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And long term investors would be thrilled with the 732% return they've received over the last three years. So even though the stock might be more "expensive" than it was before, we think the strong fundamentals warrant this stock for further research.

Moriya Transportation Engineering and ManufacturingLtd does have some risks though, and we've spotted 1 warning sign for Moriya Transportation Engineering and ManufacturingLtd that you might be interested in.

If you'd like to see other companies earning high returns, check out our free list of companies earning high returns with solid balance sheets 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.